Oil prices moved higher early Wednesday after the United States extended a ceasefire with Iran while continuing to blockade the country's ports, and as Iran attacked ships in the Persian Gulf while rejecting talks with the U.S. until the blockade is lifted.
West Texas Intermediate crude oil for June delivery was last seen up $0.15 to US$89.82 per barrel, while June Brent oil was up $0.42 to US$98.90.
Oil markets continue to react to developments in the U.S. war on Iran, which has blocked the Strait of Hormuz, trapping shipments from the Persian Gulf nations that supplied 20% of daily oil demand. While U.S. President Trump on Tuesday extended a ceasefire for attacks on the country, he refused to lift a blockade on Iran's ports. Iran has made lifting the blockade a key demand for resuming negotiations to end the war, and again allowing ships to transit the Strait.
"Oil prices continue to whipsaw, but with Brent holding below US$100 after Trump extended the ceasefire with Iran, even as peace talks remain on hold due to Tehran's refusal to negotiate while the US maintains its naval blockade...the result is a continued and severe, and potentially growing, disruption to flows, with the Strait of Hormuz effectively closed," Ole Hansen, head of commodity strategy at Saxo Bank, wrote.
Despite the U.S. ceasefire, Iran attacked two ships on Wednesday, with the Wall Street Journal reporting gunboat attacks on a container ship and another unidentified vessel, while U.S. forces boarded a sanctioned tanker in the Indian Ocean.
A report showed U.S. oil inventories fell last week. In its weekly survey, the American Petroleum Institute reported inventories fell by 4.4-milion barrels last week, under the consensus estimate for a 1.0-mllion barrel drop, according to Investing.com. The Energy Information Administration will release official inventory data later on Wednesday morning.