(RTTNews) – Crude oil prices have skyrocketed on Wednesday, extending the gains from Tuesday’s session, amid renewed Middle East tensions after the U.S. and Iran exchanged fresh strikes while U.S. President Donald Trump called the U.S.-Iran ceasefire “over.”
WTI Crude Oil for August month delivery was last seen trading up by $3.16 (or 4.49%) at $73.60 per barrel.
The Middle East tensions that began after U.S.-Israeli forces attacked Iran on February 28 subsided after the U.S. and Iran signed a preliminary Memorandum of Understanding on June 17.
The MoU allowed both nations a 60-day period of ceasefire to negotiate all sticking points. Iran reopened the Strait of Hormuz, while the U.S. lifted its sanctions on Iranian oil exports and its naval blockade on Iranian ports.
Oil prices which skyrocketed after the U.S.-Iran war began, moved lower after the signing as shipping traffic picked up from Arab region.
Yesterday, the U.K. Maritime Trade Operations announced that three tankers were struck by projectiles in separate incidents. No casualties were reported, though.
Following this, U.S. Central Command struck more than 80 targets in Iran, and the U.S. revoked the permits given to Iran to export its oil.
Iran’s Islamic Revolutionary Guards Corps claimed hitting nearly 85 U.S. bases in Kuwait and Bahrain as a retaliatory measure.
In Turkey, U.S. President Donald Trump stated that he considered the ceasefire with Iran “over” though he stated he would allow negotiations to continue. Of note, Trump observed that it is a waste of time dealing with Iran.
Later, Trump also suggested that the U.S. could seek control of Iran’s Kharg Island which is Iran’s principal oil export terminal.
In addition, Trump warned that if the situation escalates, the U.S. may target Iran’s desalination plants and acknowledged the possibility of reinstating the U.S. naval blockade on Iranian ports.
These sudden developments renewed concerns of a broader escalation in the Middle East and due to the fresh supply disruption threats, crude oil prices started moving higher.
The preliminary round of U.S.-Iran talks concluded on a progressive note. Both sides agreed to schedule the next round after the burial of Iran’s slain late Supreme Leader Ayatollah Ali Khamenei on July 9.
Market participants are anxious of further attacks as Trump believes Iran could re-lay sea mines across the Strait of Hormuz.
On the inventory front, data from the American Petroleum Institute revealed that inventories fell by 399,000 barrels for the week ending July 3, following a 6,072,000-barrel draw of the previous week. Commercial crude inventories, excluding the Strategic Petroleum Reserve have declined by nearly 60,000,000 barrels over the past 12 weeks.
According to the U.S. Energy Information Administration, for the week ending July 3, crude oil inventories in the U.S. increased by 3,000,000 barrels.
For the same period, gasoline inventories decreased by 1,904,000 barrels, distillate inventories (which include diesel and heating oil) decreased by 4,980,000 barrels, and heating oil inventories decreased by 477,000 barrels.
Concerns of a supply glut due to Iranian exports flooding the market as well as Sunday’s decision by the Organization of Petroleum Exporting Countries to hike their output by 188,000 barrels per day from August have vanished with this sudden development in the Middle East.
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