Kinetic escalations and 7.2-million-barrel US stock draw propelled oil benchmarks higher

Oil prices advanced Wednesday as aggressive Washington rhetoric and expanding Middle East military actions restored prompt risk premiums.

Brent rose $1.65 (1.8%) to $93.10, while U.S. WTI gained $1.83 (2.0%) to $90.03.

The reversal followed executive warnings of severe strikes on Iran, US retaliatory operations after an Apache helicopter downing, and a precision strike on a non-compliant tanker in the Gulf of Oman.

Gains were provisionally capped by executive disclosures that US forces covertly escorted 100 million barrels of supply through the restricted Strait of Hormuz. However, structural friction intensified after a US-backed IAEA resolution ordered Tehran to declare its enriched uranium stocks.

Concurrently, soaring energy costs drove May US inflation upward at its fastest three-year pace, hardening market bets for a December Federal Reserve rate hike.

The upward trajectory is fundamentally underpinned by severe commercial storage depletion. The EIA confirmed domestic stockpiles plummeted 7.2 million barrels last week, nearly doubling the projected 4.0-million-barrel draw. With the Strategic Petroleum Reserve hitting its lowest level since August 2023, the Department of Energy announced an emergency 40-million-barrel oil loan facility to curb fuel spikes, while sluggish Chinese imports continue to cap global spot differentials.

Written by: Aiman Haikal