Oil prices edged higher on Thursday as continuous supply disruptions due to the Iran conflict raised concerns over tightening fuel reserves across the globe. Benchmark oil prices traded marginally higher, with WTI Crude rising 0.58% to $98.83 a barrel and Brent Crude gaining 0.44% to $105.5 a barrel.The recovery comes after a sharp decline on Wednesday, when both oil benchmarks dropped more than 5.6% after US President Donald Trump said that negotiations with Iran were nearing completion. At the same time, Trump warned Tehran of more attacks if it refused to accept a peace agreement.Markets remain uncertain over whether the talks will produce a breakthrough, especially as tensions around the Strait of Hormuz continue, nearing the 3 month mark now. Before the conflict began, the Strait of Hormuz carried oil and liquefied natural gas shipments equal to roughly 20% of global consumption. The route has remained largely shut.Earlier, Iran had announced the formation of a new “Persian Gulf Strait Authority”, saying that a “controlled maritime zone” would operate in the Strait of Hormuz.Meanwhile, continuous disruption to supplies from the Middle East has forced countries to increasingly tap both commercial and strategic reserves, adding to concerns over tightening inventories. Data released by the US Energy Information Administration showed that the United States pulled nearly 10 million barrels from its Strategic Petroleum Reserve last week, the largest weekly drawdown ever recorded.The agency also reported that commercial crude inventories fell by 7.9 million barrels to 445 million barrels, compared with analysts’ expectations of a 2.9 million-barrel decline in a Reuters poll. Gasoline stockpiles dropped by 1.5 million barrels, while distillate inventories increased by 372,000 barrels.“The drawdown in oil inventories will make it difficult for oil prices to remain low,” Mingyu Gao, chief researcher for energy and chemicals at China Futures told Reuters.“With the Strait of Hormuz blocked, global refined-product and onshore crude inventories are expected to fall below their lowest levels for this time of year in the past five years by late May and late June,” Gao said.Tehran had effectively closed the crucial Strait of Hormuz after US and Israeli attacks triggered the war on February 28. While an April ceasefire brought most of the fighting to a halt, restrictions on traffic through Hormuz remain in place, alongside a US blockade of Iran’s coastline.Oil markets have remained volatile ever since the Strait was squeezed, staying beyond the $100 per barrel mark against the $70 earlier. Rising prices and falling energy shipments have forced nations to rethink their energy measures, ranging from cutting down fuel supplies to raising prices.
