West Texas Intermediate (WTI) oil prices remained steady around $84.50 per barrel during European trading hours on Wednesday, following three consecutive days of gains, as geopolitical tensions between the United States and Iran continued to fuel concerns over global oil supply [1][2]. The ongoing friction has led to heightened risk premiums in the oil market, with traders adopting a cautious stance due to the lack of progress toward a resolution and the continued partial closure of the strategic Strait of Hormuz [1][2].
US President Donald Trump confirmed that the US naval blockade remains in effect and stated that there are currently no active negotiations with Tehran, while also signaling that additional sanctions could be announced this week [1][2]. Despite official claims that the Strait of Hormuz is open and mines have been cleared, shipping risks remain elevated, with eight reported vessel attacks in the region this month targeting ships linked to Saudi Arabia and the United Arab Emirates, severely disrupting maritime traffic [1]. Reports of reduced vessel traffic through the Strait have further raised concerns about potential oil supply disruptions [2].
In response to the shipping slowdown, Iraq's cabinet approved new export mechanisms to route crude oil through alternative outlets using specialized international and local companies [1]. Meanwhile, Deutsche Bank's macro strategy team highlighted the absence of negotiations to reopen the Strait of Hormuz, reinforcing the upward trend in Brent futures and the risk of prolonged elevated energy costs [1].
On the inventory front, a slightly bullish US API report showed crude inventories fell by 328,000 barrels last week, surpassing market expectations for a 74,000-barrel draw, while stocks at the WTI delivery hub in Cushing declined by 1.4 million barrels [2]. Product inventories were mixed: gasoline stocks rose by 1.1 million barrels, while distillate inventories fell by 2.8 million barrels [2]. The EIA inventory report is expected later today [2]. US diesel crack spreads surged above $100 per barrel, reaching a record high due to global refining constraints and supply disruptions, with diesel cracks more than doubling since the start of the US-Iran conflict and rising over 20% month-to-date [2]. Export restrictions from Russia, following Ukrainian drone attacks on refineries, have further reduced diesel availability and contributed to the tightening market [2].
CONCLUSION
WTI oil prices are being supported by persistent US-Iran tensions, supply disruptions in the Strait of Hormuz, and tightening inventory data. The combination of geopolitical risks, reduced shipping activity, and bullish inventory draws has led to a sustained upward trend in oil prices, with analysts warning of a prolonged period of elevated energy costs.