US-Iran Tensions Weigh on Crude Oil Prices as OPEC Hikes Production
Crude oil prices consolidated below their one-month high on Thursday as tensions between the US and Iran continued to escalate. Iranian President Masoud Pezeshkian said it would be better to end the war with dignity, weighing on crude prices. Meanwhile, President Trump threatened Iran and its trading partners with economic isolation, dampening hopes for a swift reopening of the Strait of Hormuz.
The International Energy Agency (IEA) reported that the global oil supply deficit will worsen, even as oil demand takes a hit from the war and high prices. The IEA said global oil inventories will fall in Q3 at twice the previously estimated rate due to ongoing disruptions from the US-Iran war.
Crude prices have some support amid fresh Israeli attacks on Iran-backed Hezbollah in Lebanon, dampening prospects of ending hostilities in the Middle East and a quick reopening of the Strait of Hormuz. Additionally, OPEC delegates approved their final increase of +188,000 bpd in crude production for September, which might prove difficult to achieve amid renewed US-Iran military attacks in the region.
US Energy Secretary Chris Wright said that the US is playing the long game with Iran, implying no plans for de-escalation of the conflict. This limited supply from the Middle East could support crude prices despite the bearish factor of OPEC's production increase.