KEY POINTS
- Brent crude rose 0.3% to $91.87 a barrel, while October WTI gained 0.2% to $84.53.
- Uncertainty over the US-Iran conflict and shipping through the Strait of Hormuz continues to support oil prices.
- A surprise 4.4-million-barrel increase in US crude inventories is limiting further gains.
Oil prices remained broadly stable in early Asian trading on Thursday as investors assessed the outlook for the U.S.-Iran conflict and uncertainty surrounding the movement of oil tankers through the strategically important Strait of Hormuz.
Brent crude remained above $91 a barrel, while U.S. West Texas Intermediate (WTI) traded around $85, with market participants closely watching developments in the Middle East for signs of either an escalation or progress towards peace talks.
Brent crude futures for October delivery gained 25 cents, or 0.3%, to $91.87 a barrel by 0037 GMT.
September WTI futures edged down 2 cents to $85.81 a barrel, while the more actively traded October WTI contract added 14 cents, or 0.2%, to $84.53.
Both major benchmarks had already recorded their fourth consecutive daily gains on Wednesday, settling at their highest levels since July 24.
The September WTI contract is due to expire later on Thursday, potentially contributing to some volatility as traders adjust their positions.
Analysts said oil prices continue to receive support from sporadic attacks and heightened geopolitical tensions across the Middle East.
Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said the market had remained elevated because of ongoing regional tensions but lacked a fresh catalyst for a major price jump in the absence of further escalation.
He expects oil prices to maintain a gradual upward trend as uncertainty surrounding peace negotiations persists and tensions involving Iran, the United Arab Emirates and Oman remain elevated.
The situation has also drawn renewed attention to relations between Iran and the UAE after the UAE suspended financial and economic transactions with Iran until further notice.
Strait of Hormuz remains a major concern
The biggest concern for oil traders remains the Strait of Hormuz, one of the world’s most important shipping routes for energy supplies.
US President Donald Trump said on Tuesday that the Strait was open and that no talks were taking place with Iran. Tehran, however, maintained that the waterway remained closed.
Shipping activity through the Strait slowed on Wednesday, with many shipowners avoiding the route because of uncertainty over when and how the blockade would be lifted.
Any prolonged disruption to shipping through the waterway could put further upward pressure on crude prices because of its importance to global oil supplies.
While geopolitical risks are supporting oil prices, higher US crude inventories are providing some resistance to a stronger rally.
The US Energy Information Administration reported that crude inventories increased by 4.4 million barrels in the week ended August 14. That was significantly higher than market expectations for a decline of about 600,000 barrels.
Gasoline inventories also increased, while distillate stockpiles declined.
The unexpected rise in crude stocks suggests that US supply conditions remain relatively comfortable, helping to offset some of the upward pressure created by Middle East tensions.
For now, traders appear caught between two opposing forces: the risk of supply disruptions caused by the US-Iran conflict and relatively comfortable US inventories.
A significant escalation, particularly any prolonged disruption around the Strait of Hormuz, could send prices sharply higher. Conversely, credible progress towards a ceasefire or the reopening of shipping routes could ease the geopolitical premium currently supporting crude prices.
