Oil prices rose on Thursday after Trump said a ‘massive armada’ was heading towards Iran as the US President increased pressure on the regime to agree a nuclear deal.
Brent crude prices were 1.7% higher at $69.61 at the time of writing. WTI rose 1.96% $64.45.
“US naval and air forces are building up in the Gulf as the US has ratcheted up threats on Iran,” Susannah Streeter, Chief Investment Strategist, Wealth Club said.
“President Trump has warned that the US is ready to act, if Tehran does not reach a nuclear agreement. Given that similar build ups were a precursor to the assault on Venezuela and the previous strikes on Iran, there’s an expectation that action is imminent.
“So, supply concerns are swirling given that such conflict would disrupt crude shipments from Iran and across the region, particularly if the Strait of Hormuz, a key route is made impassable. The benchmark Brent Crude has hit the highest level since September, flirting with $70 dollars a barrel.”
The building presence of the US military coincided with a draw in crude inventories yesterday, which together builds a picture of potential supply constraints that are likley support prices in the near term.
“From the supply perspective, according to the latest EIA report, U.S. commercial crude oil inventories declined by around 2.3 million barrels, a sharp reversal from the previous week’s build and well below market expectations,” explained Linh Tran, Market Analyst at XS.com.
“This development suggests that the short-term supply–demand balance has tightened, reflecting steady refinery demand and constrained barrels available to the market. In addition, winter storms in the U.S. disrupted part of domestic production, with temporary outages estimated at nearly 2 million barrels per day, equivalent to about 15% of total U.S. oil output, while also affecting logistics operations along the Gulf Coast. These factors have increased short-term supply risks and have been partially priced into oil markets.”