US-Iran war: Oil prices inched higher on Tuesday, although gains remained capped as market participants shifted their focus from easing geopolitical tensions in the Middle East to expectations of higher supply and the outlook for global demand.
Brent crude futures rose 28 cents, or 0.39%, to $72.29 a barrel, while US West Texas Intermediate (WTI) crude climbed 29 cents, or 0.26%, to $68.84 a barrel. Both benchmarks had settled near their pre-Iran conflict levels in the previous session.
What’s driving crude oil prices today?
US President Donald Trump on Monday said Washington would either strike a deal with Iran or “finish the job,” reiterating the possibility of military action even as Tehran maintained a defiant stance following the funeral of former Supreme Leader Ayatollah Ali Khamenei.
“The steps towards recovery in supply have eased the immediate risk premium, but the market remains wary of putting too much faith in the stability of the current truce given the on again-off again nature of U.S.-Iran relations,” Tim Waterer, chief market analyst at KCM Trade, was quoted as saying by Reuters.
Market participants are closely monitoring the ongoing US-Iran negotiations, particularly for their potential impact on shipping through the Strait of Hormuz, while also assessing the recovery in crude oil exports from the Gulf region.
The United Arab Emirates increased its crude production to more than 3.8 million barrels per day (bpd) in June, the highest level since April 2020 and above pre-Iran conflict levels, after exiting OPEC production quotas in May, according to Reuters estimates.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreed on Sunday to raise production targets by another 188,000 bpd from August, following similar output increases announced for June and July.
“We will be watching for early signs of demand response, particularly from China. The market has priced in a lot of the positive supply news, so the next leg in oil prices will depend on whether physical reality matches the optimistic headlines,” Waterer added.
Separately, Saudi Arabia reduced the August official selling price (OSP) of its flagship Arab Light crude for Asian buyers to $1.50 per barrel below the Oman/Dubai benchmark. According to a Saudi Aramco pricing statement released on Monday, the reduction of $1.10 from the previous month marks the steepest monthly cut in more than two decades.
(With inputs from Reuters)
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
