Oil Prices Jump on Middle East Strikes and API Crude Draw
Key Takeaways
- •Brent crude rose 4.59% to $87.95 per barrel, while West Texas Intermediate increased 4.58% to $82.89.
- •U.S. Central Command said Iranian forces launched ballistic missiles at U.S. bases in the Middle East, and all of the missiles were intercepted.
- •CENTCOM said U.S. and Saudi forces carried out precision strikes on multiple logistics and weapons sites in eastern Iraq.
- •The American Petroleum Institute reported that U.S. crude inventories fell by about 3.3 million barrels last week.
- •Market participants are awaiting the U.S. Energy Information Administration’s inventory report later on Wednesday for a second reading on U.S. stockpiles.
Oil prices surged in early Asian trading on Wednesday, erasing much of Tuesday’s decline after renewed hostilities in the Middle East and a bullish U.S. inventory report from the American Petroleum Institute (API).
At the time of writing, Brent crude was up 4.59% at $87.95 per barrel, while West Texas Intermediate was trading 4.58% higher at $82.89.
Oil prices had been falling since the United States ended 13 consecutive nights of attacks on Iran last Thursday, with both sides highlighting hopes for a diplomatic breakthrough. Those expectations were weakened late Tuesday after U.S. Central Command (CENTCOM) said Iranian forces launched multiple ballistic missiles at U.S. bases across the Middle East in what it described as a surprise attack. CENTCOM said all incoming missiles were intercepted and no U.S. positions were hit.
CENTCOM then said U.S. and Saudi forces carried out “precision strikes” against “multiple terrorist logistics and weapons sites across eastern Iraq.” While the United States did not target locations inside Iran, the latest fighting ended the brief pause in hostilities that had helped unwind part of the geopolitical risk premium in oil.
Prices also found support from another large decline in U.S. crude inventories. The API reported that U.S. crude stockpiles fell by about 3.3 million barrels last week. Over the same period, the Strategic Petroleum Reserve released 3.7 million barrels, bringing it to its lowest level since March 1983. Gasoline inventories rose by 918,000 barrels, while distillate stocks increased by 355,000 barrels.
The combination of Middle East escalation and lower crude stocks matters because it can quickly shift how traders assess near-term supply risk, especially in a market already reacting to fast-moving military developments. Traders are now watching for any further escalation and are also waiting for the U.S. Energy Information Administration’s inventory report later on Wednesday, which will give a second read on U.S. stockpiles after the API data. If the EIA confirms a crude draw, or if additional strikes occur in the Middle East, prices could continue to move higher.
As has been the case since the Iran war began, volatility remains the dominant feature of oil markets and shows no sign of easing.
By Josh Owens for Oilprice.com
