Summary
- IEA warns of possibility of critically low stockpiles in summer
- Vitol exec said market underpricing risks from war
- U.S. stockpile data due at 1430 GMT
(Reuters) – Oil prices rose more than 2% on Wednesday, extending gains from the previous session, as hostilities in the Middle East erupted anew and talks between Tehran and Washington showed little progress.
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Brent futures were up $2.02, or 2.1%, at $98.02 a barrel at 1209 GMT, while U.S. West Texas Intermediate (WTI) crude climbed $2.06, or 2.2%, to $95.82. Brent and WTI hit their highest since May 27 and May 22, respectively, earlier in the day.
Iran launched ballistic missiles towards regional neighbours Kuwait and Bahrain, injuring dozens according to Kuwaiti authorities, and U.S. forces conducted strikes on Iran’s Qeshm Island.
U.S. President Donald Trump has said negotiations are continuing, though Iran’s semi-official Tasnim news agency said on Wednesday that Iran had not responded to the U.S. in recent days and that exchanges of texts through intermediaries were suspended until Iran’s conditions on Lebanon are met.
In a podcast interview released on Wednesday, Trump said Iran had agreed to not have a nuclear weapon and that Supreme Leader Ayatollah Mojtaba Khamenei was involved in negotiations.
Tom Baker, a managing director for Bahrain at global commodities trader Vitol, told an energy conference on Tuesday that the global oil market was underpricing some risks from the Iran war, even as the conflict entered its fourth month.
The International Energy Agency’s warning that global oil inventories could hit critical levels ahead of the peak summer demand period if stock draws continue at their current pace was adding to the bullish sentiment.
“The stalling in the U.S.-Iran negotiations and IEA warnings of critical global low stock levels are adding upward layers in risk premium in benchmark prices,” said Emril Jamil, a senior analyst for oil at LSEG.
U.S. crude oil inventories fell for a seventh straight week last week, according to market sources citing American Petroleum Institute data released on Tuesday. Crude stocks declined by 6.8 million barrels in the week ended May 29, the sources said.
U.S. government data on stockpiles is due at 10:30 a.m. ET (1430 GMT) on Wednesday.
Additional reporting by Stephanie Kelly in London, Nicole Jao in New York and Jeslyn Lerh in Singapore; Editing by Cynthia Osterman, Kevin Buckland and Tomasz Janowski
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