Crude oil prices extended gains on Thursday, as escalating tensions in the Middle East continued to stoke concerns over disruptions to energy supply, with ongoing military activity in the region and a stalled diplomatic process reinforcing the bullish tone.
Navigation through the Strait of Hormuz remained heavily restricted, keeping the physical market tight.
The situation was compounded after tankers turned away from the Bab el-Mandeb Strait, following reports that Yemen’s Houthi forces had taken military action against vessels in the chokepoint.
Fears of further incidents could deter maritime traffic, deepening concerns over a tighter physical market and lending further support to prices.
The latest EIA data showed an unexpected build in crude inventories. However, this has done little to offset the tightness elsewhere, with US strategic petroleum reserves still sitting near multi-decade lows. Tight stockpiles could amplify the impact of disruptions on prices.
Looking ahead, oil markets are likely to remain highly sensitive to the situation in the Middle East. Any signs of resumption of diplomatic engagement could ease some of the upward pressure on crude. However, a wider escalation risks further squeezing the physical market and driving up prices.
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