Oil steadied after a three-day rally as US president Donald Trump said renewed attacks on Iran would be short-lived, while US officials signaled robust energy flows through the Strait of Hormuz.
Brent traded above $95 a barrel after surging more than 8 per cent over the past three sessions, while West Texas Intermediate was near $91. Asked how long the US bombing campaign could continue, Trump said “I don’t think too long,” although the president added that “we’re prepared to do another one”.
The renewed US strikes followed weeks of relative calm, with Iran retaliating by firing drones and missiles at American bases across the Middle East, in line with a pattern used throughout the six-month war. The American military escorted 40 vessels through the waterway on Tuesday carrying 18 million barrels of oil, according to CNN, which cited two officials familiar with the matter.
“The latest escalation should keep support under the market, however, keep in mind both the US and Iran are looking for off-ramps here,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities. “More peace talks could deflate prices quickly.”
Still, neither the US nor Iran has shown a willingness to come to the negotiating table since the collapse of an interim peace accord agreed in June. Crude prices are almost 60 per cent higher this year, with refined products such as diesel rallying even harder due to the Middle East conflict and the Russia-Ukraine war.
US officials continue to point to consistent crude shipments exiting the Persian Gulf, despite persistent threats to shipping. This week, energy secretary Chris Wright said 17 million barrels of oil exited the waterway on Monday, with flows averaging about 8 million barrels a day.
The global oil market is returning closer to balance as supplies continue to exit the Persian Gulf, although risks remain, Chevron chief executive Mike Wirth said in an interview in Caracas. The escalation of hostilities between the US and Iran this week is a concern, he added.
In a sign the conflict could be prolonged, the US is extending troop deployments in the Middle East to maintain its presence of 50,000 personnel in the region and give Trump flexibility on military options, the Wall Street Journal reported, citing people familiar with the matter.
Separately, US crude inventories fell by 4.5 million barrels last week, the first decline since late July, according to Energy Information Administration figures. Stockpiles at the key storage hub at Cushing, Oklahoma, rose marginally to 22.5 million barrels, while gasoline holdings dropped. – Bloomberg