Oil prices jumped more than 1% on Wednesday, with Brent and WTI both near three-week highs, after the United Arab Emirates suspended all financial and economic transactions with Iran. Traffic through the Strait of Hormuz remains slow despite conflicting claims from Washington and Tehran over whether the waterway is open, while a separate supply analysis puts Gulf output still shut in at 8.3 million barrels per day.
Brent crude climbed $1.17, or nearly 1.3%, to $92.21 on Wednesday, its highest level since July 30. West Texas Intermediate rose $1.51, or 1.8%, to $86.45 a barrel, the highest since July 24. Both benchmarks extended a run higher as investors weighed a fresh escalation between the UAE and Iran.
UAE severs ties with Iran as Hormuz traffic stays thin
The UAE decided to suspend all financial and economic transactions with Iran, citing the latest missile attacks, and shipping data showed most vessel owners continued avoiding the Strait of Hormuz because of unclear signals about its reopening. President Trump said Tuesday that no talks were taking place with Iran and that the strait was open, but Iran maintained the waterway remained shut. A temporary ceasefire expired Monday, and according to Reuters, a senior Iranian official said the country was moving to a "fully offensive" military posture amid the diplomatic stalemate.
Nevertheless, the standoff is not confined to the strait. Oil shipments from Russia's western ports fell to about 2.3 million barrels per day in the first half of August, 15% below the initial loading plan, because of disruptions at the Black Sea port of Novorossiysk.
Gulf supply gap persists even as U.S. stockpiles build
Separately, the physical market is still absorbing a large hole in Gulf output. The IEA's August Oil Market Report found 8.3 million barrels per day of Gulf output remained shut in, even as global oil supply rose 2.4 million barrels per day to 101.5 million in July. That total still sat 6.3 million barrels per day below year-ago levels.
At the same time, U.S. supply data points the other way domestically. Crude inventories rose by 4.4 million barrels to 428.8 million barrels last week, the Energy Information Administration said, easing concerns about tight supplies. Refiners have kept buying crude on high margins, and U.S. refinery utilization rose one percentage point to 97.2% in the week, as Ukraine's attacks on Russia's refining sector kept global fuel supplies tight.
Sources: Commodities & Futures News, Commodities Analysis & Opinion
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