Oil prices extended their sharp rally on Thursday after the US struck targets in Iran for a second straight day, reviving fears of disruption to energy supplies from the Middle East.
Brent crude rose as much as 1.4% to above $79 a barrel after surging more than 5% in the previous session. West Texas Intermediate traded near $74, taking oil's gains over the past two sessions to more than 6%.
The latest rally came after US forces launched additional strikes aimed at degrading Iran's ability to threaten freedom of navigation through the Strait of Hormuz. Tehran, meanwhile, said it would launch a large-scale retaliatory operation against US bases in the region.
Strait Of Hormuz Back In Focus?
The escalation has once again put the Strait of Hormuz — the key waterway connecting Persian Gulf oil producers with global markets — at the centre of the crude market.
When the conflict began in February, the near-total closure of the strait forced regional producers to shut oil fields as storage facilities filled up. Traffic had started recovering following an interim US-Iran peace agreement, but renewed fighting could once again discourage shipowners from using the route.
US President Donald Trump said on Wednesday that the interim peace agreement was over and raised the possibility of reimposing a blockade on Iranian ports. He also warned that oil prices could climb further and suggested future action could include a “take over” of Iran's Kharg Island export hub.
Oil Inventories Add To Supply Concerns
Supply worries are also being amplified by tightening US fuel inventories. While commercial crude stockpiles rose by nearly 3 million barrels last week, a 6.2 million-barrel draw from the Strategic Petroleum Reserve meant overall oil inventories fell by more than 3 million barrels.
Distillate inventories, which include diesel, declined by 5 million barrels, while gasoline stockpiles fell to their lowest seasonal level since 2012.
The US Treasury has also revoked a sanctions waiver that had allowed Tehran to sell oil under the interim agreement. Millions of barrels of Iranian crude that had moved out of the Gulf following the easing of sanctions are now in limbo.
ALSO READ: Navigating The Danger Zone: What Routes Are Ships Taking To Cross Strait Of Hormuz
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