Oil rises 2% due to tensions between the US and Iran, which improved demand

Oil prices rose more than 2% on Wednesday, buoyed by potential supply risks if US-Iran tensions escalate, while crude extraction from key reserves signaled stronger demand. Brent crude futures rose $1.52, or 2.2%, to $70.32 a barrel by 1320 GMT. U.S. West Texas Intermediate crude rose $1.50, or almost 2.4%, to $65.46.“Ongoing tensions in the Middle East continue to support prices, although there has been no supply disruption to date,” said UBS oil analyst Giovanni Staunovo. US President Donald Trump said on Tuesday he is considering sending a second aircraft carrier to the Middle East, even as Washington and Tehran prepare to resume negotiations aimed at averting a new conflict.

“While the rhetoric remains combative at times, there are no signs of escalation, at least for now, and the US president believes Iran will eventually want to make a deal on its nuclear missile program,” PVM Oil Associates analyst Tamas Varga said in a note.

A slightly weaker dollar also helped prices rise. A stronger U.S. currency is hurting demand for dollar-denominated crude oil from foreign buyers. Raw materials coming from inventories held independently at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage center and from Fujairah indicate a tight market, UBS’s Staunovo said, also supporting prices. In the broader market, OPEC left its oil market supply and demand expectations largely unchanged in its monthly report, but stressed that global demand for broader crude will fall by 400,000 barrels per day in the second quarter compared with the first. According to the report, Russian oil production fell by about 0.6% in January compared to December. Egypt has ordered international oil companies to double production by 2030, with existing contracts to be revised to boost new investment, Energean International’s country manager for Egypt told Reuters on Tuesday. Traders also await weekly U.S. oil inventory data from the Energy Information Administration on Wednesday. U.S. crude inventories rose by 13.4 million barrels in the week ended Feb. 6, market sources said, citing American Petroleum Institute figures on Tuesday.