Oil prices climb on Wednesday

Oil prices climbed on Wednesday as markets questioned whether a planned record release of emergency oil reserves could offset supply disruptions caused by the escalating US–Israeli conflict with Iran.

Brent crude increased 59 cents, or 0.7 per cent, to $88.39 a barrel by 0727 GMT, while US West Texas Intermediate (WTI) rose 98 cents, or 1.2 per cent, to $84.43 a barrel. The rebound followed a sharp decline of more than 11 per cent on Tuesday.

The recovery came after reports that the International Energy Agency (IEA) is considering a record drawdown of strategic oil reserves exceeding the 182 million barrels released in 2022 after Russia’s invasion of Ukraine. Goldman Sachs analysts said such a release could offset about 12 days of an estimated 15.4 million barrels per day disruption to Gulf oil exports.

Fighting intensified on Tuesday as US and Israeli forces launched what officials described as the heaviest airstrikes of the war against Iran, while the US military said it destroyed 16 Iranian mine-laying vessels near the Strait of Hormuz after Washington warned Tehran against disrupting shipping in the vital energy corridor.

Some analysts remained sceptical about the impact of a reserve release. DBS energy sector head Suvro Sarkar said strategic stockpile drawdowns would not resolve the crisis, adding that oil prices will largely depend on how long the war continues.

Meanwhile, the Group of Seven leaders is discussing a potential coordinated release of emergency oil reserves, with French President Emmanuel Macron hosting a video call on Wednesday to address the conflict’s impact on energy markets.

Supply concerns also intensified after Abu Dhabi National Oil Company (ADNOC) shut its Ruwais refinery following a fire caused by a drone strike. Saudi Arabia is attempting to increase exports through the Red Sea port of Yanbu, though shipments remain far below levels needed to compensate for reduced flows through the Strait of Hormuz.

Energy consultancy Wood Mackenzie estimated the conflict is currently disrupting about 15 million barrels per day of Gulf oil and petroleum product supplies, warning that crude prices could rise to $150 per barrel if disruptions persist. Morgan Stanley said even a quick resolution would likely leave energy markets facing weeks of supply disruptions.

Attribution: Reuters