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EMEA Oil Update: Crude Prices Ease from Multi-Week Highs

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Oil futures eased from multi-week highs on Wednesday as traders balanced US-Iran clashes and Strait of Hormuz supply disruptions against continuous market flows.

Brent crude futures eased 0.5% to $94.19 per barrel and hit its highest since July 24 earlier in the session at $97.04 per barrel. ICE Dubai First Line (Platts) energy futures were down 1% to $84.51/bbl, slipping from a near three-months peak.

According to US Central Command, American forces launched a large-scale wave of strikes against Islamic Revolutionary Guard Corps targets in response to attempted attacks on commercial ships and failed efforts to deploy sea mines in the Hormuz Strait.

In retaliation, IRGC officials warned of severe punishment and claimed responsibility for operations targeting US bases in the region, while the US administration maintained a naval blockade aimed at crippling Iranian oil exports.

Middle Eastern crude prices are strengthening as Asian refiners step up purchases, absorbing rising spot supply amid expectations of prolonged regional tightness, according to Kpler in a Tuesday note.

Producers increased tenders for cargoes loading over the next two to three months, signaling more near-term supply, while stronger award prices point to firm buying demand, Kpler Senior Crude Oil Analyst Muyu Xu said.

On the domestic supply front, American Petroleum Institute data released on Tuesday showed that US crude oil inventories fell by 2.6 million barrels for the week ended August 28, following a 4.2 million-barrel build the previous week.

Markets are now awaiting confirmation from the US Energy Information Administration's inventory report to gauge the trajectory of domestic reserves as ongoing Middle Eastern disruption keeps global inventories under intense pressure.

"Moreover, the oil market is likely to come under significant stress, as disruptions to flows from the Persian Gulf continue to tighten global crude and refined product balances. This will keep inventories under pressure and support elevated prices," ANZ analysts said.

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