Oil edged higher on Wednesday as Iran-related tensions escalated but receding hopes for a quick solution to the US-China trade war, which has dented global growth, dragged on prices. West Texas Intermediate crude futures traded up $0.23, or 0.42%, at $55.44 a barrel by 1225 GMT.
Brent crude futures were at $61.23 a barrel, up $0.32, or 0.53%. US aircraft carrier strike group Abraham Lincoln on Tuesday sailed through the vital Strait of Hormuz through which a fifth of the world’s oil flows as leaders in Iran blamed days of protests over fuel price hikes on foreign enemies.
Tensions in the Gulf have risen since attacks on oil tankers this summer, including off the coast of the United Arab Emirates, and a major attack on key Saudi energy plants which briefly crippled supplies from the world’s top oil exporter. Iran President Hassan Rouhani on Wednesday claimed victory over protests which have left scores reportedly dead. These events contribute to a sense of increasing tensions in the Middle East and explain why we have an uptick in the oil price today, said SEB chief commodities analyst Bjarne Schieldrop.
It’s all part of a continuous row of incidents revolving around Saudi Arabia and Iran that have still not been resolved. Meanwhile, crude inventories in the United States rose by 6 million barrels last week to 445.9 million, industry group the American Petroleum Institute said on Tuesday. The API data showed US inventories posted a rather robust increase last week, which if confirmed by the EIA report, could see oil prices continue to slide, said Edward Moya, an analyst at brokerage Oanda.
Official US government inventory data from the Energy Information Administration (EIA) is due at 1030 EST (1530 GMT) on Wednesday. US crude demand has slowed during a protracted trade war with China. Hopes for an end to the dispute in the signing of a so-called phase one agreement have dimmed amid disagreements over the removal of tariffs.
China on Wednesday also condemned legislation passed by the US Senate aimed at protecting human rights in Hong Kong amid a crackdown on a pro-democracy protest movement. (The) fear here is still the trade talks with a lot of pessimism starting to filter through, said Stephen Innes, market strategist at AxiTrader. If we don’t get a significant roll-back on tariffs, that’s quite negative.