Oil rises as doubts over US-Iran deal heighten supply concerns

Oil prices surged on Wednesday (Aug 12) as concerns over Middle East supply disruptions grew, despite US crude inventories expanding, following attacks on two ships in the Hormuz and Bab el-Mandeb straits. Brent futures increased by US$0.72, or 0.81 percent, to US$89.63 per barrel, while US West Texas Intermediate crude rose by US$0.71, or 0.85 percent, to US$83.91.

Both benchmarks closed over US$1 higher on Tuesday, marking their highest prices since July 31 and extending gains after a 5 percent jump on Monday. The US and Iran-aligned Houthis separately targeted shipping in the Strait of Hormuz and Bab el-Mandeb Strait on Tuesday. Iran’s top security official, Mohsen Rezaei, warned that the critical shipping route could remain closed unless the US accepted Iran’s conditions for ending the conflict, including releasing frozen Iranian assets and an end to other regional conflicts.

Shipping data revealed that traffic through the Strait of Hormuz fell to six vessels on Monday, down from an average of about 11 over a 10-day period. Before the war, daily traffic through the waterway typically averaged between 125 and 140 vessels. While US crude oil and fuel inventories were projected to have declined in the week ending Aug 7, industry sources cited by Reuters indicated that US crude reserves actually rose by 9.1 million barrels, while gasoline and distillate inventories fell by 1.5 million barrels and 596,000 barrels, respectively.

This significant increase in crude stocks could potentially alleviate market concerns about supply tightness, according to Haitong Futures. Official figures from the US Energy Information Administration (EIA) are expected to be released at 10:30 am ET (14:30 GMT) on Wednesday. Longer-term supply disruptions of approximately 600,000 barrels per day to Middle East crude oil are anticipated to persist until the end of 2027.