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(Bloomberg) — Oil rose for a second day as geopolitical tensions resurfaced following the US downing of an Iranian drone near an American aircraft carrier in the Arabian Sea.
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Brent advanced to around $68 a barrel, after adding 1.6% on Tuesday, while West Texas Intermediate was near $64. The skirmish spooked oil markets, but President Donald Trump reiterated the sides are maintaining diplomatic talks, and White House Press Secretary Karoline Leavitt confirmed US-Iran negotiations are still scheduled for Friday.
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Meanwhile, US crude inventories fell by 11.1 million barrels last week, according to the American Petroleum Institute. That would be the biggest drawdown since June if confirmed by official data due on Wednesday.
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In another sign of rising tensions, a US-flagged oil tanker was hailed by Iranian ships in the Straits of Hormuz, a vital waterway for the global trade. Iran’s Islamic Revolutionary Guard Corps “harassed” the Stena Imperative, which is part of a US-military fuel procurement program, as it made the transit, US Central Command said.
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“The drone and tanker skirmishes are highlighting to the market how volatile the situation is, and how things could escalate out of hand even unintentionally,” said Saul Kavonic, senior energy analyst at MST Marquee, estimating a $5-10 per barrel geopolitical risk premium for oil prices “in anticipation of possible US strikes on Iran.”
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Concerns over any conflict in the Middle East, a source of about a third of the world’s crude, helped lift prices last month despite signs of a growing oversupply. Oil has also been caught up in the tumult in wider commodity markets that saw gold and silver plummet before recouping some of those losses on Tuesday.
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Elsewhere, OPEC+ expects global oil demand to grow gradually from March or April, bringing additional balance to the market, according to Russian Deputy Prime Minister Alexander Novak. The group is due to decide on March 1 whether to resume monthly output increases after a first-quarter pause.
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