Oil prices surged nearly 4% on Wednesday as geopolitical tensions in West Asia escalated and US crude inventories fell, according to Reuters. Brent crude futures rose $3.30 (3.9%) to $87.39 a barrel, while US West Texas Intermediate (WTI) crude gained $3.05 (3.8%) to $82.31 a barrel.
Geopolitical Drivers
The price surge was triggered by a series of military actions in the Middle East. According to the source, the United States and Saudi Arabia conducted joint strikes in Iraq, while the US military intercepted ballistic missiles launched by Iran towards US forces in the region. Washington called this "an attempted surprise attack" by Tehran. Separately, Iran's elite Revolutionary Guards said they fired several ballistic missiles at a US air base and military Central Command center in Jordan.
Key events:
- US and Saudi forces launched strikes on weapon sites across eastern Iraq.
- Saudi Arabia reported intercepting drones from Iranian-backed groups in Iraq that were targeting Saudi energy infrastructure.
- Saudi Arabia also said its armed forces, in coordination with US Central Command, carried out "targeted strikes" against Iran-backed groups in Iraq it blamed for drone attacks on the kingdom's oil facilities.
ING analysts commented: "Renewed strength comes after the U.S. said it intercepted a surprise attack on U.S. troops." They added that Saudi Arabia intercepted drones from Iranian-backed groups in Iraq, and that "the latest developments dampen expectations for a swift de-escalation in the Persian Gulf."
Supply Side: US Inventories and OPEC+ Policy
On the supply front, US crude inventories fell by about 3.3 million barrels in the week ended July 24, according to market sources citing data from the American Petroleum Institute (API). Official inventory data from the Energy Information Administration (EIA) is due later on Wednesday, the source reported.
Further supporting prices, OPEC+ is likely to halt oil output increases for three months starting in October, sources told Reuters, after the producer group completes the scheduled return of barrels following voluntary cuts.
| Commodity | Price Change | Level (per barrel) |
|---|---|---|
| Brent crude | +$3.30 (+3.9%) | $87.39 |
| WTI crude | +$3.05 (+3.8%) | $82.31 |
Demand and Market Outlook
The combination of geopolitical risk and tightening supply has reinforced bullish sentiment in oil markets. The ING analysts noted that the military actions "dampen expectations for a swift de-escalation in the Persian Gulf," implying that supply disruptions or risk premiums could persist. The market is now awaiting the EIA inventory report for confirmation of the API drawdown, and any further clarity on OPEC+ production plans in the coming weeks.
Sources:
