Oil rallied on a CNN report that Israel is preparing to potentially strike Iranian nuclear facilities.
West Texas Intermediate jumped as much as 3.5% earlier, briefly surpassing $64 a barrel, before paring gains. It wasn't clear whether a final decision on any attack had been made, CNN said, citing US intelligence and unidentified American officials.
Oil has been volatile since last week on mixed headlines about the fate of Iran-US nuclear talks, which could pave the way for more barrels to return to a market that's expected to be oversupplied later in the year. An attack by Israel would hinder any progress in those negotiations and add to unrest in the Middle East, which supplies about a third of the world's crude.
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“Either the impact on the oil market in case of an attack is assumed to be low, or the probability for an attack is assumed to be low,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. Wednesday's gain “is not much when we are talking bombs in the Middle East major oil producing region.”
The CNN report also briefly pushed traditional currency havens including the Swiss franc and Japanese yen higher.
Israel has long weighed targeting Iran's nuclear program. A big question, however, is just how many of the atomic sites are insulated against anything but the most extreme attack.
Geopolitical concerns have for now overshadowed expectations of looser balances heading into the second half of the year, as OPEC and its allies bring back barrels to the market. US shale oil output hasn't peaked and can still expand, but not if prices are near $50 a barrel, ConocoPhillips' chief executive officer said Tuesday.
Earlier this week, Iran's Supreme Leader Ali Khamenei said he didn't think the latest effort to negotiate with the US would lead to a result. WTI crude could tumble to as low as $40 a barrel if sanctions on the Islamic Republic's oil exports are lifted, according to Bloomberg Intelligence.
Prices:
Brent for July settlement gained 1.2% to $66.14 a barrel at 1:36 p.m. in London.
WTI for July delivery rose 1.4% to $62.87 a barrel.
Iran has been able to keep exporting crude in spite of increasing sanctions by the US and allies including the UK and Europe. Tehran has even managed to boost supply recently, according to Goldman Sachs Group Inc.
“Iran has increased its supply by about a million barrels a day over the last couple of years,” Samantha Dart, Goldman's co-head of global commodities research, said on Bloomberg Television. “If you remove a million barrels a day from Iran, this could represent an upside of about $8 a barrel to the crude oil price.”
Related coverage:
Oil Refineries Are Suddenly Making Money Again After Crude Slump
API Reports US Crude Stockpiles Rose 2.5M Bbl Last Week
Iran's Khamenei: Don't Think Talks With US Will Yield Result
Russian Oil Flows Are Becoming Increasingly Obscured
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