By: Creamer media

Oil prices edged higher on Thursday as investors weighed rising tensions between the United States and Iran, amid concerns that potential strikes on Tehran or disruptions to shipping routes could threaten global supply.

As of 6:07, Brent crude futures gained 21 cents, or 0.30 percent, to $$69.61 a barrel, while U.S. West Texas Intermediate crude climbed 26 cents, or 0.40 percent, to $64.89 per barrel.

Both contracts closed higher on Wednesday, with Brent advancing 0.87 percent and WTI climbing more than 1.05 percent, as concerns over escalating U.S.-Iran tensions outweighed data showing an increase in U.S. crude inventories.

U.S.-Iran tensions escalate as negotiations continue

Oil prices rose after U.S. President Donald Trump said on Wednesday, following talks with Israeli Prime Minister Benjamin Netanyahu, that no definitive agreement had been reached on the next steps regarding Iran, though he stressed that negotiations with Tehran would continue.

A day earlier, Trump indicated he was weighing the deployment of a second aircraft carrier to the Middle East if a deal with Iran fails to materialize, even as both sides prepared to resume discussions. U.S. and Iranian officials held indirect talks in Oman last week, but details on the timing and location of the next round have yet to be confirmed.

“Although the American Petroleum Institute (API) reported an increase in inventories by 13.4 million barrels last week, its impact was overshadowed by news reports indicating that America was contemplating the seizure of tankers carrying Iranian crude and considering sending yet another aircraft carrier strike group to the Middle East in the event negotiations over Iran’s nuclear program fail,” said Vijay Valecha, Chief Investment Officer, Century Financial.

“Adding another layer of geopolitical risk premium to the oil markets were the remarks made by Netanyahu, stating the ongoing discussions with Iran should extend beyond the nuclear program to include long-range weaponry and the regional proxy network,” he added.

Valecha explained that Iran produced approximately 3.3 mbpd in January, making it the fourth-largest OPEC producer. 1.63 mbpd of this total included crude and condensate shipments. Thus, any escalation in tensions could impact these oil flows.

U.S. crude inventories rise more than expected

“This year, geopolitical tensions have led to a 10% increase in oil prices, even though long-term fundamentals point to a supply glut,” Valecha added.

U.S. job growth picked up more than expected in January, and the unemployment rate eased to 4.3 percent, the Labor Department said, pointing to underlying economic resilience. A stronger economic backdrop has helped underpin expectations for steady oil demand.

However, the rise in oil prices was limited by a sharp increase in U.S. crude inventories. The Energy Information Administration reported that stockpiles rose by 8.5 million barrels to 428.8 million barrels last week, far surpassing analysts’ expectations of a build of just 793,000 barrels.