US-Iran Tensions Heat Up, Oil Prices Jump US$3 per Barrel
JAKARTA - Oil prices rose about US$3 per barrel on Wednesday after tensions in the Middle East escalated again. The attacks of the United States and Saudi Arabia in Iraq, the interception of Iranian missiles, and the decline in US crude oil stocks pushed the market to move up.
Arab News, quoted Wednesday, July 29, reported that the price of Brent futures contracts, the global oil benchmark, rose US$3.15 or 3.8 percent to US$87.24 per barrel at 08.20 Saudi time. West Texas Intermediate or WTI, the US oil benchmark, rose US$2.73 or 3.4 percent to US$81.99 per barrel.
ING analysts said the price rally came after the US said it had foiled a surprise attack on its forces. The development reduced expectations that tensions in the Gulf region would quickly ease.
The United States and Saudi Arabia on Wednesday attacked Iranian-backed groups in Iraq. Both countries accused the group of being behind a drone attack on Saudi Arabian oil facilities.
Iran warned that blaming Tehran for the attack was a "big miscalculation".
The attack in Iraq came hours after the US military said it had foiled an Iranian surprise attack on American forces in the region.
Tensions have also put pressure on traffic in the Strait of Hormuz. Only five commodity carriers crossed the line on Tuesday. The movement of tankers is still low.
Before the war, about a fifth of the world's crude oil and natural gas shipments passed through the Strait of Hormuz.
Oman is offering a plan to manage the route backed by Gulf states. The proposal includes voluntary levies on passing ships, according to a Gulf source and a Western diplomat told Reuters.
However, Iran rejected the joint management of the Strait of Hormuz by regional countries. A senior Iranian official told Reuters that the rejection closed the chances of success of Oman's proposal.
DBS Bank Energy Research Head Suvro Sarkar predicts that Brent prices will move sharply in the range of US$80 to US$100 per barrel in the near future. The movement will follow the ups and downs of the conflict in the Middle East.
Sarkar said the latest escalation came after US President Donald Trump signaled a return to diplomacy this week.
According to Sarkar, the stalled negotiations have not completely ended the Strait of Hormuz blockade. Even if tensions ease, oil prices are expected to remain below US$80 per barrel.
On the supply side, industry data from the American Petroleum Institute or API showed U.S. crude stocks fell by about 3.3 million barrels in the week ended July 24.
Official data on oil inventories from the US Energy Information Administration or EIA is scheduled to be released on Wednesday.
Market attention is also focused on OPEC+, the OPEC group and its partner producing countries. A source told Reuters that the group is likely to stop increasing production for three months starting October after completing the return of supplies that were previously voluntarily cut.