Oil rises above $84 on fresh Middle East supply fears

Global oil prices rebounded on Wednesday after joint United States and Saudi Arabian military strikes against Iran-aligned groups in Iraq heightened concerns over possible disruptions to crude oil supplies from the Middle East.

International benchmark Brent crude rose 3.12 per cent to $84.64 per barrel from $82.08, while West Texas Intermediate (WTI) gained 3.57 per cent to $82.09 per barrel, up from $79.26 in the previous session.

The rally followed confirmation by the US Central Command (CENTCOM) that American and Saudi forces carried out precision strikes on July 28 against Iran-backed militant positions in Iraq after a series of drone attacks targeting US troops and Saudi energy infrastructure.

According to CENTCOM, the coordinated operation targeted logistics and weapons facilities in eastern Iraq in response to more than 30 drone attacks allegedly directed by Iran’s Islamic Revolutionary Guard Corps (IRGC) over the previous 72 hours.

The command stated that the attacks on US forces were unsuccessful.

The Saudi Defence Ministry also confirmed the operation, saying the strikes were conducted after attacks launched from Iraqi territory targeted petroleum facilities within the kingdom.

Adding to concerns over global oil supplies, Iran’s Deputy Foreign Minister, Kazem Gharibabadi, disclosed that Tehran had rejected Oman’s proposal to reopen the Strait of Hormuz unless one shipping lane and part of a second route remain entirely under Iranian control.

He said Oman had proposed a temporary shipping arrangement that would divide control of the passage between Iran and Oman, but Tehran declined the proposal.

The renewed geopolitical tensions reversed part of Tuesday’s decline, when Brent crude fell to $80.67 per barrel after the United States and Iran paused direct hostilities.

Meanwhile, market participants are also monitoring demand indicators from the United States after the American Petroleum Institute reported that US crude oil inventories increased by 3.29 million barrels last week, against market expectations of a 2.5 million-barrel drawdown.

Investors are awaiting official inventory figures from the US Energy Information Administration later on Wednesday for further direction on global supply and demand fundamentals.