US Oil Update: Oil Benchmarks Snap 3-Day Decline as US-Iran Conflict Escalates
Oil prices gained more than 6% on Wednesday as escalating regional conflict outweighed potential US-Iran diplomatic progress, while focus shifted to the upcoming crude inventory data from the EIA.Front-month West Texas Intermediate crude futures surged 6.5% to $84.40 per barrel, while Brent futures added 6.6% to $89.66/bbl.Analysts noted that recent strikes on regional infrastructure highlight the severe hurdles facing potential US-Iran diplomatic efforts.Saxo Bank analysts said the move upwards today "snapped a three-day slide which had been Brent's worst since April 2020, and Iran's rejection of the Omani plan to reopen the Strait of Hormuz may, in our view, keep a risk premium in the curve."Iran reportedly turned down Oman's proposal for joint control of the Strait of Hormuz, instead repeating demands for more oversight of the waterway.On the geopolitical front, President Donald Trump has threatened to hit Iran hard following "surprise" attacks on US targets in the Middle East, Fox News reported, citing an interview with Trump which was yet to be broadcast."We'll be hitting them hard. They are going to get a beating," Fox News reported, quoting Trump.Supporting prices on the supply side, American Petroleum Institute data revealed a 3.3-million-barrel decrease in US crude inventories for the week ending July 24, with markets now awaiting confirmation from the official Energy Information Administration report.Meanwhile, OPEC+ is projected to pause further production hikes after approving a final scheduled September increase of 188,000 barrels per day during its virtual meeting on August 2, as the group continues to monitor ongoing Persian Gulf supply disruptions, ING analysts noted.