(Investing) – Oil prices steadied on Wednesday after recent sharp gains as elevated Middle East tensions pushed up fears of supply disruptions, while industry data showed a massive draw in U.S. inventories.
At 08:00 ET (12:00 GMT), Brent oil futures for August gained 0.1% to $76.52 a barrel, and West Texas Intermediate crude futures rose 0.1% to $73.32 a barrel.
Iran’s Khamenei raises tensions further
Israel and Iran continued to carry out strikes against each other on Wednesday, as hostilities between the Middle Eastern powers showed few signs of deescalation.
The conflict, which was sparked by Israel attacking Iran’s nuclear facilities last week, ramped up concerns that it could spill over into a broader Middle Eastern conflict, disrupting oil supplies from the crude-rich region.
U.S. involvement in the war was also squarely in focus, after U.S. President Donald Trump called for Iran’s “unconditional surrender.”
Iran’s Supreme Leader Ayatollah Ali Khamenei rejected Trump’s demands in a statement read by a television presenter on Wednesday.
This marks Khamenei’s first public comments since Friday, when he delivered a speech after Israel began bombarding Iran.
“Intelligent people who know Iran, the Iranian nation, and its history will never speak to this nation in threatening language because the Iranian nation will not surrender,” Khamenei stated.
“The Americans should know that any U.S. military intervention will undoubtedly be accompanied by irreparable damage,” he said.
Prices have rallied around 10% since Israel started its attack on Iran last week and are now close to a five-month high.
“The biggest fear for the oil market is the shutdown of the Strait of Hormuz. This could impact oil flows from the Persian Gulf. Almost a third of global seaborne oil trade moves through this choke point. A significant disruption to these flows would be enough to push prices to $120/bbl,” said analysts at ING, in a note.
Bumper draw for U.S. inventories – API
Data from the American Petroleum Institute showed U.S. oil inventories shrank by 10.13 million barrels (mb) last week, much more than expectations for a draw of 0.6 mb.
The reading helped spur bets that U.S. fuel demand will pick up in the coming months, especially with the onset of the travel-heavy summer season.
The API data usually heralds a similar reading from official inventory data, which is due later on Wednesday.
But soft U.S. economic data–May retail sales and industrial production both missed expectations– spurred some concerns over weak growth leading to sluggish demand, especially as the world’s largest fuel consumer grapples with high trade tariffs.
Focus on Wednesday is also squarely on the Federal Reserve, which is set to keep interest rates unchanged. But investors are betting that the Fed will wax dovish in the face of worsening economic conditions.
Ambar Warrick contributed to this article
