Oil Exxtend to Rise, Countions of US-Iran Risks
Oil prices rose again on Thursday (February 19), as the market assessed the risk of a US-Iran conflict still looming over the major oil-producing region, even as both sides continue to try to defuse tensions through diplomacy. Market concerns primarily center on the potential for supply disruptions if the situation escalates into confrontation.
In morning trading, Brent rose 0.3% to $70.58/barrel, while WTI strengthened 0.4% to $65.44/barrel. Both had surged more than 4% on Wednesday, reaching their highest close since January 30, as market participants factored in a “risk premium” for supply disruptions.
Several analysts believe this rally was driven by concerns that US action against Iran could occur in the near future. The market's primary focus is on the impact not only on Iranian exports but also on oil flows in the Persian Gulf region, particularly the risk of disruptions to shipping through the Strait of Hormuz—a passageway through which approximately 20% of the world's oil supply passes.
Tensions escalated after Iranian media reported the Strait of Hormuz was briefly closed for several hours on Tuesday, although the exact nature of the reopening was not disclosed. Iran also issued a warning of flight (NOTAM) regarding a planned rocket launch in the south on Thursday, while the US reportedly deployed warships near Iran.
On the diplomatic front, the White House stated some progress had been made in talks in Geneva, but gaps remained on several issues, and Washington expected Iran to return with further details in a few weeks. However, some market participants believe a full-scale conflict remains unlikely, as the surge in oil prices risks depressing the US domestic economy and politics, so any military action is expected to be limited.
Data-wise, sentiment was also supported by the API report, which showed US crude oil, gasoline, and distillate inventories fell last week—contrary to market expectations that crude stocks had risen. The market is now awaiting official inventory data from the EIA, scheduled for release on Thursday.
Source: Newsmaker.id
