HOUSTON: Brent crude prices settled 1% higher in a volatile session on Wednesday, driven by renewed military strikes between the US and Iran that have restricted world oil supply.
The US-Iran war is now in its seventh month, with the latest attacks representing the biggest exchange of fire between Tehran and Washington since July. US forces struck Iran's southern coast and Iran fired on American bases across the region.
Brent crude futures settled up 98 cents, or 1%, at US$95.63 a barrel. US West Texas Intermediate crude futures rose 79 cents, or 0.9%, to settle at US$91.01.
Brent and WTI swung between gains of as much as US$2 a barrel and losses of US$1 a barrel throughout the session. The session highs for both benchmarks were the highest since July 24.
"The latest strikes mark a significant escalation after roughly a month of relative calm, with the US targeting Iranian radar and mine-laying capabilities and Iran retaliating against US positions across the region," Mark Schaefer, a director at brokerage Liquidity Energy, wrote in a note.
"The key concern for the oil market is whether the renewed fighting leads to another deterioration in physical flows through the region," Schaefer said.
The war began with joint US-Israeli strikes on Iranian targets in late February. Since then, Iran has effectively shut down shipping traffic in the Strait of Hormuz, a critical waterway that carried about a fifth of global oil and LNG consumed before the conflict.
Nations worldwide have been trying to limit price rises by finding other sources of supply and relying on their reserves, which have also dwindled.
The Islamic Revolutionary Guard Corps said the US attacks would further restrict traffic through the strait.
Four commodity vessels transited the Strait of Hormuz, below the 10-day average of around 13, preliminary Kpler shipping data showed on Wednesday. Two oil tankers hit sea mines and were disabled while attempting to transit the Strait, Iran's Revolutionary Guards said on Wednesday in a statement shared by state media.
Iran also added more ships it deems as non-compliant and subject to fines, confiscation or detention if they try to sail through the Strait of Hormuz, according to a government website.
However, US Secretary of Energy Chris Wright claimed on Tuesday that 17 million barrels of oil transited the Strait of Hormuz on Monday, calling it the largest volume of crude to pass through the waterway since the Iran war began.
In August, Iraq boosted its oil exports, and shipments were set to climb again in September as wide profits and Iranian approval for its tankers to pass through the Strait of Hormuz have encouraged buyers, according to industry sources and shipping data.
"While the increase in conflicts will slow transit through the Strait of Hormuz in the near term, the market has absorbed the fact that workaround crude oil supplies can still make it to the market eventually," said Dennis Kissler, senior vice president of trading at BOK Financial.
Opec+ is also likely to keep its oil output policy unchanged for October at a meeting on Sunday, three sources close to the matter told Reuters, as the producer group completes the unwinding of one layer of production cuts this month and turns its focus to 2027 quota negotiations.
Elsewhere, Russia carried out a heavy missile and drone attack on energy infrastructure in Ukraine's southern region of Odesa overnight, transmission system operator Ukrenergo said on Wednesday.
In the US, crude oil inventories fell by 4.5 million barrels last week, the Energy Information Administration said on Wednesday, compared with analysts' expectations in a Reuters poll for a 1.1 million-barrel draw. — Reuters
