WTI hits 6-week high of $86, as supply concerns rise

Oil prices continue rallying on Wednesday as hostilities in Iran threaten to escalate out of control, and reports of vessels turning around in the Red Sea heighten concerns about supply disruptions.

Against this backdrop, the benchmark West Texas Intermediate reached a fresh six-week high of $86, up 26% so far in July.

The US military hit targets in Iran for the 11th consecutive day on Wednesday, and President Donald Trump threatened to attack the Pickaxe Mountain, an area which is believed to hide an underground nuclear facility.

Tehran affirmed that any attack on nuclear sites would extend the conflict to the region.

Meanwhile, Reuters reported that three Saudi Arabian vessels have turned around in the Red Sea, following the announcement of a blockade of the Bab el-Mandeb Strait by Yemen’s Iran-backed Houthi militias. This is another key waterway for Saudi crude, and its closure will, highly likely, accentuate fears about supply disruptions.

Analysts at Rabobank’s RaboResearch Global Economics & Markets team highlight that crude benchmarks have surged on mounting supply concerns, noting that, “Brent, WTI and refined products rallied sharply as Hormuz disruptions, intensified Russia-Ukraine strikes, CPC terminal outages, and record-tight diesel markets renewed fears of a broader supply crunch.”

The bank frames these overlapping disruptions as a significant escalation in perceived supply risk, with the combination of geopolitical tensions, infrastructure outages and tight diesel availability reinforcing the market’s focus on potential constraints to worldwide oil flows.

On Tuesday, data released by the American Petroleum Institute (API) revealed that crude oil stocks increased by 2.6 mln barrels in the week of July 17, against market expectations of a 1.5 mln decline, as demand declined. The relief in oil prices provided by these figures, however, has been short-lived, with the war in Iran attracting all the attention.

(Source: OANDA)