Oil prices extended gains on Wednesday as fears of further supply disruptions intensified after U.S. forces struck Iranian military targets for the 11th straight night, while oil tankers made U-turns in the Red Sea after warnings by Iran-backed Houthi militia.
Brent crude futures rose $1, or 1.1%, to $92.01 a barrel at 0330 GMT. U.S. West Texas Intermediate crude climbed 82 cents, or 1.0%, to $85.16. The gains came after oil settled at a five-week high on Tuesday in the wake of U.S. forces striking targets in southern and western Iran, while Iran attacked U.S. facilities in Bahrain, Kuwait and Jordan. The U.S. military said it began its latest strikes on Iran late on Tuesday in the United States, or early Wednesday in Iran. The U.S. attacks came a short while after the Kuwaiti army said its air defences were intercepting Iranian drones on Wednesday.
The constant trading of strikes have raised fears of further disruptions to global energy supplies after Yemen’s Iran-aligned Houthis opened a new front in the Iran war by threatening to target vessels carrying Saudi oil in the Bab el-Mandeb Strait and announcing a naval blockade of Saudi Arabia.
The Bab el-Mandeb waterway at the southern entrance to the Red Sea has become an increasingly important route for Saudi crude exports as traffic through the Strait of Hormuz has fallen sharply since a ceasefire between the United States and Iran collapsed earlier this month. Three oil tankers loaded with Saudi crude for China and India made U-turns in the Red Sea on Tuesday, heading towards the Suez Canal rather than braving the Yemeni coast following a warning from Yemen’s Iran-aligned Houthi militia.
“This would force tankers to enter and exit the Red Sea via the Suez Canal, adding significant time and expense to voyages to Asia,” said ING commodity strategists on Wednesday, adding that tensions in the Black Sea also added to supply uncertainty. The Caspian Pipeline Consortium has stopped receiving oil from Kazakhstan after suspending loadings on Monday due to attacks on oil tankers at its Black Sea terminal blamed on Ukrainian drones. Ukraine has not commented on the attacks.
“The longer the suspension drags on, the greater the likelihood that Kazakhstan will be forced to curb upstream production,” said ING. Meanwhile, data from the American Petroleum Institute showed that U.S. crude and distillate inventories rose last week, while gasoline stockpiles fell, market sources said. The inventory data comes ahead of official figures from the U.S. Energy Information Administration on Wednesday.
(Reporting by Siddharth Cavale in New York and Jeslyn Lerh in Singapore; Editing by Lincoln Feast.)