Gulf Region Unrest, Minor Drop in US Stocks Keep Oil Prices Tight
Crude oil prices were mixed on Wednesday over a less-than-expected drop in US crude inventories and claims that Iranian naval forces seized an oil tanker off the coast of the United Arab Emirates (UAE).
International benchmark Brent crude was trading at $72.45 per barrel, dropped 0.06% after closing Monday at $72.41 a barrel.
American benchmark West Texas Intermediate (WTI) was trading at $70.47 a barrel at the same time with a 0.13% decrease after ending the previous session at $70.56 per barrel.
Late Tuesday, the American Petroleum Institute (API) predicted a drop in US crude oil stockpiles of 879,000 barrels, compared to the market expectation of a fall of 2.9 million barrels.
A significant drop in inventories indicates an increase in crude demand in the US, the world’s largest oil consumer, assuaging market concerns over dwindling demand.
The US Energy Information Administration (EIA) will issue official oil stock figures later on Wednesday. If the EIA also reports a drop in inventories, oil prices are projected to rise further.
Oil prices were positively supported after Iranian-backed forces claimed to have seized an oil tanker in the Gulf off the coast of the UAE.
The reports came hours after a British maritime trade agency said a “potential hijack” was underway near Fujairah, with at least four ships broadcasting warnings that they had lost control of their steering under unknown circumstances.
Tuesday’s incident came less than a week after an Israeli tanker came under attack off the coast of Oman, killing two crew members. Israel, as well as the US and UK, blamed it on Iran, which quickly rejected the accusation.
It also came hours after Iran’s new president Ebraheem Raeisi was officially endorsed by the country’s supreme leader, Ali Khamenei, in a ceremony attended by top civilian and military officials in Tehran.
Raeisi, a conservative cleric, has not reacted to the recent incidents so far, which have again escalated tensions between Iran and the West after months of efforts toward de-escalation.
However, investor jitters over falling demand were fueled after the economic data from the world’s biggest oil consumers, the US and China, fell short of expectations.
US manufacturing showed growth in July but at a slower pace than June, with raw material shortages and consumers shifting their spending from products to services.
US Manufacturing Purchasing Manager’s Index (PMI) fell to 59.5 in July, down from 60.6 in June and below the forecast of 60.9.
Manufacturing activity growth in China also fell below expectations in July, with the PMI falling to 50.4 from 50.9 in June, compared to a market forecast of 50.8.
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Gulf Region Unrest, Minor Drop in US Stocks Keep Oil Prices Tight
