Oil prices rose around 2% on Thursday to settle at their highest level in six months, as traders worried about escalating tensions between the United States and Iran, which have stepped up military activity in the oil-producing Middle East.
Brent crude futures settled up $1.31, or 1.9% at $71.66 a barrel, while U.S. West Texas Intermediate crude settled up $1.24, or 1.9% at $66.43.
After advancing more than 4% on Wednesday, Brent closed at its highest since July 31, while WTI closed at its highest since August 1.
Oil prices got a boost from “geopolitical tensions and the worry that the U.S. is going to strike (Iran) in the near future,” said Andrew Lipow, president of consultancy Lipow Oil Associates. “The market will continue to rally in anticipation of something happening.”
Iran planned a joint naval exercise with Russia, Iran’s semi-official Fars news agency reported, days after it shut down the Strait of Hormuz for a few hours for military drills. The Strait is a vital link for trade, with about 20% of global oil supply passing through it.
TRUMP WARNS IRAN
U.S. President Donald Trump warned Iran on Thursday that it must reach a deal over its nuclear program or “bad things” will happen, and appeared to set a 10-day deadline before the U.S. might take action.
The U.S. has deployed aircraft carriers, warships and jets to the region, with U.S. Vice President JD Vance saying Washington was considering whether it should continue diplomatic engagement with Tehran or pursue another option.
Iran issued a notice to airmen that it planned rocket launches in areas across the south of the country on Thursday, according to the U.S. Federal Aviation Administration website.
Some countries have asked their residents to leave Iran.
Separately, crude oil exports from Saudi Arabia, the world’s largest oil exporter, fell to 6.988 million barrels per day, their lowest level since September, data from the Joint Organizations Data Initiative showed on Thursday. Earlier this month, Reuters reported that producer group OPEC and its allies were leaning toward a resumption of oil output increases from April.
Two days of peace talks in Geneva between Ukraine and Russia ended on Wednesday without a breakthrough, as Ukrainian President Volodymyr Zelenskiy accused Moscow of stalling U.S.-mediated efforts to end the four-year-old war.
U.S. crude stocks dropped by 9 million barrels, as refining utilization and exports climbed. That was contrary to expectations in a Reuters poll that crude stocks would rise by 2.1 million barrels in the week ending February 13. Gasoline and distillate inventories also fell last week, thanks to higher consumer demand.
“We had a build last week because of weather storms and so we are seeing a drawdown,” said Phil Flynn, senior analyst with Price Futures Group.
“We have a solid market with solid demand and that should give (prices) support until the end of the day.”