Oil prices rose in early Asian trade on Wednesday after yet another escalation in the Middle East, with Iran firing missiles at Kuwait and Bahrain, and the U.S. firing on and disabling an oil tanker heading toward Iran.
At the time of writing, Brent front-month futures had climbed 1.09% to trade at $97.05 per barrel, while West Texas Intermediate had risen 1.19% to $94.88 per barrel. Both benchmarks are trading near one-week highs after posting strong gains in the previous session.
According to U.S. Central Command (CENTCOM), Iran fired two missiles toward Kuwait, which either fell short or broke apart before reaching their targets. It then fired three at Bahrain, which were intercepted by U.S. and Bahraini air defenses.
The U.S. also claimed to have shot down three one-way attack drones launched toward civilian mariners that were transiting the Strait.
Separately, U.S. forces fired on and disabled an unladen oil tanker that was attempting to reach Iran’s largest oil export terminal at Kharg Island.
CENTCOM reported that the Botswana-flagged M/T Lexie ignored multiple orders over a 24-hour period and continued toward the Arabian Gulf port. The vessel was ultimately stopped when a U.S. aircraft fired a Hellfire missile into the ship’s engine room, rendering it unable to continue its voyage.
The tanker incident marks the sixth time since April 13 that U.S. forces have disabled a commercial vessel, with 122 others being redirected by the blockade.
The conflict appears to be escalating just as hopes of a diplomatic breakthrough fade once again, with Iranian media reporting that Tehran has not communicated with Washington for several days. President Trump has maintained that talks remain active, calling the Iranian claims “false and erroneous”.
Adding to the upward pressure on oil prices, American Petroleum Institute figures showed U.S. crude inventories fell for a seventh consecutive week, declining by 6.8 million barrels for the week ending May 29.
Markets are now awaiting official inventory data from the Energy Information Administration, due out later on Wednesday, for confirmation of the drawdown.
A diplomatic breakthrough could yet drag prices down, but after tumbling in late May, it seems both Brent and WTI will continue to climb until an agreement is signed.
By Josh Owens for Oilprice.com
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