Oil prices extend gains on Wednesday

Oil prices extended gains on Wednesday as escalating tensions between the United States and Iran fuelled fears of potential supply disruptions in the Middle East, while a sharp draw in US crude inventories added further support.

Brent crude rose to around $67.5 per barrel, while US West Texas Intermediate (WTI) climbed to about $63.5, building on nearly 2 per cent gains recorded in the previous session.

Market sentiment remained cautious after the US military shot down an Iranian drone near the USS Abraham Lincoln in the Arabian Sea, while Iranian gunboats approached a US-flagged tanker in the Strait of Hormuz, a vital route for global oil shipments.

Concerns over diplomatic uncertainty also weighed on markets, with Tehran seeking changes to the venue and scope of planned talks with Washington, raising doubts over whether negotiations would proceed as scheduled.

Oil prices were further supported by industry data showing US crude inventories fell by more than 11 million barrels last week, according to American Petroleum Institute figures, countering expectations of a build.

Analysts said geopolitical risks and supply concerns are likely to keep a risk premium priced into oil markets in the near term.

Attribution: Reuters