Forexpros – Crude oil futures erased losses on Wednesday, jumping to an eight-month high as growing fears over a disruption to Iranian oil supplies continued to drive prices higher.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD103.31 a barrel during U.S. morning trade, gaining 0.35%.
It earlier rose by as much as 0.65% to trade at USD103.69 a barrel, the highest since May 11.
Crude oil prices turned higher as tensions between Iran and the U.S. appeared to be escalating after Iran’s military chief Ataollah Salehi warned the U.S. against sending naval ships back to the Persian Gulf.
The U.S. dismissed the warning, with Pentagon spokesman George Little saying earlier that “regularly scheduled movements” including through the Strait of Hormuz will continue as usual.
The Strait of Hormuz, located between Iran and Oman, is one of the most important oil-shipping channels in the world, handling about 33% of all ocean-borne traded oil, according to the U.S. Energy Information Administration.
Iran is the world’s fourth largest oil producer, pumping nearly 5% of the world’s oil in 2010. The threat of a major supply disruption from the country has helped support oil prices in recent weeks.
Prices were down earlier as concerns over the euro zone’s ongoing debt crisis intensified after a closely watched auction of German government bonds earlier in the day was met with lackluster investor demand.
Germany sold EUR4.06 billion of 10-year bonds at an average yield of 1.93%, compared with 1.98% at November’s launch of the January 2022 bond, which was the worst German bond auction on record.
Adding to fears over the region’s debt woes, bank deposits at the European Central Bank’s overnight facility reached a new all-time high of EUR453 billion on Tuesday, underscoring the unwillingness of European lenders to lend to each other.
Meanwhile, markets were awaiting fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Thursday’s government report could show crude stockpiles fell by 1.2 million barrels last week, while gasoline supplies were forecast to increase by 1.0 million barrels.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery rallied 1.15% to trade at USD113.42 a barrel, with the spread between the Brent and crude contracts standing at USD10.1 a barrel.
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