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EMEA Oil Update: Crude Gains Amid Middle East Military Strikes

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Crude futures surged on Wednesday following renewed military strikes in the Middle East, while API data revealed a larger-than-expected drawdown in US crude inventories.

Brent futures contracts surged 6.5% to $89.55 per barrel. Murban futures were up 2.2% to $86/bbl.

"Oil prices are trading higher this morning following strikes on US troops and Saudi energy infrastructure, highlighting the challenges of getting a US and Iran deal back on track," ING analysts said.

Iran turned down Oman's proposal for joint control of the Strait of Hormuz, instead repeating demands for more oversight of the waterway, according to media reports on Tuesday.

During a state broadcast Iran's Deputy Foreign Minister Kazem Gharibabadi said that Oman suggested joint 50-50 control of the waterway, with each country controlling shipping lanes closest to their respective coastlines.

On the supply side, data from the American Petroleum Institute revealed Tuesday that US crude oil inventories decreased by 3.3 million barrels in the week ended July 24, according to a Bloomberg-compiled survey.

Attention now turns to the official petroleum inventory report from the US Energy Information Administration.

Meanwhile, OPEC+ is projected to pause further production quota increases after approving a final scheduled hike for September.

Before that, the producer group is reportedly expected to sign off on an output increase of 188,000 barrels per day when it meets virtually on August 2, continuing to evaluate regional conflict impacts.

"Obviously, supply increases on paper don't necessarily reflect an actual supply increase, given the ongoing supply disruptions in the Persian Gulf. However, post-disruption, the announced supply increases from the group reinforce the view of a well-supplied market through 2027," ING added.

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