Oil prices jump $2 as Iran knocks hopes of diplomatic progress

LONDON: Oil prices jumped by more than $2 on Wednesday after Iran said there was little reason to expect diplomatic progress with the US, leaving the Brent benchmark hovering near five-month highs, with further market support from falling US crude and product inventories.

Brent crude futures gained $2.06, or 1.9%, to $110.85 a barrel by 1048 GMT. US West Texas Intermediate (WTI) crude was up $2.13, or 2.2%, at $99.95.

In the previous session, Brent hit its highest in five months while WTI touched a six-month peak before prices fell back on discussions on mediation efforts in a meeting between Iran’s president and Pakistan’s army chief in Tehran.

On Wednesday, Iran’s Foreign Minister Abbas Araqchi told the Financial Times that Iran was fully prepared to defend itself and President Masoud Pezeshkian told state media the US could not expect dialogue while blockading and threatening Iran.

Iran’s Guards claim strikes against Oman and Bahrain

“Neither of the two geopolitical conflicts underpinning the market’s bullish sentiment has shown any signs of de-escalation,” PVM analysts said, referring to the Middle East and Russia-Ukraine wars.

At least 18 vessel attacks were recorded over the past two weeks, Kpler data showed, while LSEG analysts warned that Iran was targeting tankers well beyond the Strait of Hormuz, reaching into the Gulf of Oman and jeopardising Gulf crude loadings and ship-to-ship transfers supporting regional loadings.

Iran-aligned Houthis on Monday claimed responsibility for attacks on a Saudi Aramco site in Yanbu, the Shaybah oilfield and Saudi Arabia’s Riyadh and Abha airports.

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In the US, two Energy Department officials said on Tuesday that they were working with refiners around the world to boost fuel output.

US crude stocks fell by 4.9 million barrels in the week ended October 16, with gasoline and distillate inventories also down, said market sources citing API data. Government inventories data is due at 1430 GMT.