Oil prices hover around four-month high, buoyed by Iran concerns, weak dollar

[NEW YORK] Oil prices rose to their highest since late September on Wednesday on looming Iran concerns while a weak US dollar lent further support.

Brent crude futures settled up 83 cents, or 1.23 per cent, to US$68.40 a barrel. US West Texas Intermediate crude closed 82 cents, or 1.31 per cent, higher at US$63.21.

Both benchmarks were headed for their biggest monthly rises in percentage terms since July 2023, with Brent set to rise around 12 per cent and WTI around 10 per cent.

US President Donald Trump urged Iran on Wednesday to come to the table and make a deal on nuclear weapons or the next US attack would be far worse, but Tehran said that if that happened it would fight back as never before. A US aircraft carrier and supporting warships arrived in the Middle East, US officials said earlier this week.

“The markets were up on concerns about the US’ armada, but they pulled back on the possibility of peace (between Russia and Ukraine),” Phil Flynn, senior analyst at Price Futures Group.

Trilateral negotiations between Russia, Ukraine and the US are set to resume in Abu Dhabi on Feb 1, Russia’s Interfax news agency cited the Kremlin as saying.

US crude inventory draw

A surprise storage draw also supported oil prices.

The US Energy Information Administration said on Wednesday the country’s crude oil inventories fell by 2.3 million barrels to 423.8 million barrels in the week ended January 23, compared with analysts’ expectations in a Reuters poll for a 1.8 million-barrel rise.

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Oil futures surge 3% a barrel as winter storm slams US output

“A solid report, with a modest petrol and distillate build and a larger crude draw. Strong crude exports and lower imports helped to see another crude draw. The next report will be more interesting, to see the impact of the cold weather on the data,” said Giovanni Staunovo, UBS analyst.

A winter storm swept across much of the US over the weekend, straining energy infrastructure and power grids. US oil producers were bringing wells back online on Wednesday. Domestic crude output was estimated to be down around 600,000 barrels per day, roughly 4 per cent of total output.

A weak US dollar kept the prices elevated. The greenback is hovering near four-year lows against a basket of other currencies, making dollar-denominated commodities such as oil cheaper for those holding other currencies.

The US Federal Reserve held interest rates steady on Wednesday, citing still-elevated inflation alongside solid economic growth, and giving little indication in its latest policy statement of when borrowing costs might fall again.

Elsewhere, lost production in Kazakhstan is also underpinning the price rally, though the Opec+ member hopes that output at the Tengiz field might resume gradually within a week. Sources, however, have said this might take longer. REUTERS