Crude oil futures traded higher on Wednesday morning following reports of separate attacks on ships by the Houthis and US forces in the Bab el-Mandeb Strait and Strait of Hormuz, respectively. October Brent oil futures were at $90.02, up by 1.25%, and September crude oil futures on WTI (West Texas Intermediate) were at $84.27, up by 1.29% as of 9:32 AM on Wednesday. August crude oil futures were trading at ₹8044 on Multi Commodity Exchange (MCX) during the initial hour of trading on Wednesday against the previous close of ₹7940, up by 1.31%, while September futures were trading at ₹7936 against the previous close of ₹7844, up by 1.17%. Both benchmark contracts settled more than $1 higher on Tuesday, marking their highest closes since July 31 and extending gains after jumping about 5% on Monday as hopes for a peace deal between the U.S. and Iran began to fade.
Iran's top security official, Mohsen Rezaei, said on Tuesday that the vital Strait of Hormuz shipping route would remain closed unless the U.S. accepted Iran's conditions for ending the war, including the release of frozen Iranian assets and an end to other conflicts across the region. As reported by Tasnim News Agency, Iranian foreign ministry spokesperson Esmaeil Baghaei said on Monday that the strait would remain closed until the US ended its naval blockade against Iran. Speaking at a weekly press briefing in Tehran, Baghaei blamed the closure of the strategic waterway on military aggression by the US and Israel, stating that reopening it would depend on the conditions imposed on Iran and the waterway by the US and Israel. Baghaei called on Washington to stop and reverse its 'destructive actions' so that the two sides could negotiate their next steps, emphasizing that as long as the US naval blockade continues, the necessary conditions for the reopening of the Strait of Hormuz do not exist.
Quoting Yemen's Transport Ministry, a Reuters report said four crew members were killed in a suspected Houthi attack on a small cargo vessel in the Bab el-Mandeb Strait on Tuesday. Quoting Yemen's Coast Guard, it said that two Yemeni rescuers from an anti-Houthi military group were also killed in the incident. US Central Command said its forces disabled the steering gear of Panama-flagged m.v. Vela Nova as the cargo vessel attempted to transit the Gulf of Oman and violate the US blockade against Iran by sailing toward an Iranian port. A US Navy MH-60 helicopter fired two hellfire missiles into the Vela Nova's engine room after the ship's civilian crew ignored repeated warnings from American forces. As of August 11, US Central Command has redirected 55 commercial vessels attempting to run the blockade, disabled three non-compliant vessels, and boarded two, demonstrating the escalating military enforcement of the maritime restrictions.
Market sources citing American Petroleum Institute data said U.S. crude inventories rose sharply in the week ended August 7, with crude stocks rising by about 9.1 million barrels. However, gasoline and distillate inventories fell by 1.5 million barrels and 596,000 barrels, respectively, from the previous week. A Reuters poll showed that U.S. crude oil and fuel inventories were expected to have fallen last week. The crude build far exceeded expectations and, if confirmed by the EIA report later on Wednesday, could ease market concerns about supply tightness, according to Haitong Futures. Official numbers from the EIA, the statistical arm of the U.S. Department of Energy, are due at 10:30 a.m. ET on Wednesday.
The EIA expected disruptions of about 600,000 barrels per day to Middle East crude oil supplies to persist through the end of 2027. This long-term outlook adds to existing supply concerns from the ongoing Middle East conflict. Saudi Aramco has postponed the restart of its 400,000-barrel-per-day Jazan refinery to August 30 after the Houthis claimed two attacks on the plant on Sunday, according to The Economic Times. In a note on Monday, analysts at Barclays said that in the week ending August 7, crude oil and refined product net exports through the Strait of Hormuz averaged 3 million barrels per day, down from 4.4 million bpd the previous week, highlighting the significant impact of the ongoing conflict on energy infrastructure. The chokehold risk around both the Strait of Hormuz and the Bab el-Mandeb remains highly significant, with even intermittent restrictions or the threat of further incidents keeping insurance costs elevated and forcing longer shipping routes.
