Oil prices extended gains on Wednesday, as investors mulled supply risks stemming from Ukrainian attacks on Russian refineries and the potential for escalation in the Middle East conflict, while OPEC+ ministers held steady their output policy.
Brent crude futures for June rose 76 cents, or about 0.9 per cent, to $89.68 per barrel at 1346 GMT, having hit a high of $89.87 earlier in the session. U.S. West Texas Intermediate crude futures for May gained 62 cents, or 0.7 per cent, to $85.77 a barrel.
The benchmarks compounded Tuesday’s gains, when both Brent and WTI climbed 1.7 per cent to their highest since October.
Prices jumped higher on Tuesday after another round of Ukrainian drone attacks on Russian refineries threatened to take even more of the country’s processing capacity offline.
Meanwhile, concerns about a wider conflict in the Middle East that could disrupt oil supplies escalated after Iran vowed revenge against Israel for an attack on Monday that killed high-ranking military personnel.
Iran, which provides support for the Hamas militia fighting Israel in Gaza, is the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC).
Bank of America Global Research raised its 2024 Brent and WTI forecasts to $86 and $81 a barrel respectively, it said in a note on Wednesday, on firming demand and escalating political tensions.
“Low inventories across the oil complex, OPEC+ output cuts, geopolitical tensions, and robust economic growth figures have flipped price trends and now point to a tighter-than-expected summer driving season, supporting firm backwardation in crude and products,” it said.
Elsewhere on Wednesday, Taiwan’s strongest earthquake in at least 25 years briefly caused Formosa Petrochemical to halt operations at its Mailiao refinery as a precautionary measure, but works have since restarted.
Meanwhile, a meeting of the top OPEC+ ministers on Wednesday kept oil output policy unchanged and pressed some countries to boost compliance with output cuts.
The U.S. Energy Information Administration (EIA) will release oil inventory data later on Wednesday. Data from the American Petroleum Institute reported crude inventories fell by 2.3 million barrels last week, traders said on Tuesday.