Oil prices surged to a three-week peak on Wednesday due to concerns surrounding shipping activities in the Strait of Hormuz and ongoing disruptions in the oil supply chain. Brent crude futures rose by 45 cents, or 0.49 percent, reaching $91.47 by 0754 GMT, while US West Texas Intermediate crude futures saw a 45-cent increase, or 0.53 percent, hitting $85.39 per barrel.
Brent crude attained its highest level since July 30, with WTI also peaking since July 31.
Tim Waterer, the chief market analyst at KCM, mentioned, “Confidence in secure passage remains low, as shipping volumes are still significantly below normal levels. This persistent uncertainty is maintaining a geopolitical risk premium within the oil market.”
US President Donald Trump stated on Tuesday that there were no ongoing discussions with Iran and claimed that the Strait of Hormuz was open, contradicting Iran’s assertion that the water route was closed.
Following the expiration of a temporary ceasefire agreement on Monday, an Iranian official informed Reuters that due to the diplomatic deadlock, Iran was taking action. However, no strikes were reported from either side on Tuesday.
The Strait of Hormuz, previously responsible for about 20 percent of global oil and liquefied natural gas supplies, has been a major concern for energy markets since the US-Israeli conflict with Iran began in late February.
Ahmad Assiri, a research strategist at brokerage Pepperstone, mentioned, “Commercial shipping via Hormuz remains severely disrupted due to ongoing disagreements over maritime traffic regulations.”
Data revealed a slowdown in shipping through Hormuz on Wednesday, as most ship operators avoided the area due to prevailing uncertainties.
Iraq’s government announced the approval of new mechanisms for exporting Iraqi crude through specialized local and international companies and multiple export channels, effective from September 1 for a three-month period.
The recent rise in Brent crude above $91 per barrel indicates that traders are factoring in a heightened risk premium, potentially leading to prices returning to triple-digit levels, as noted by Assiri from Pepperstone.
Market sources reported a decline in US crude oil and distillate inventories but an increase in gasoline stocks last week, based on data from the American Petroleum Institute. Official inventory figures from the US Energy Information Administration are expected at 10:30 a.m. ET (1430 GMT), with analysts predicting a drop of approximately 600,000 barrels in crude stocks for the week ending August 14.
