By: Economy Middle east

Oil prices climbed more than 1.6 percent on Thursday, marking a third straight day of gains, as fears grew that the United States could launch a military strike on major Middle East producer Iran, potentially disrupting regional supplies.

As of 5:02 GMT, Brent crude futures advanced $1.11, or 1.62 percent, to $69.51 a barrel, while U.S. West Texas Intermediate rose $1.12, or 1.77 percent, to $64.33. Both benchmarks are up around 5 percent since Monday, reaching their highest levels in four months.

Trump ramps up pressure on Iran

Oil prices are being driven higher as U.S. President Donald Trump ramps up pressure on Iran to halt its nuclear program, including warnings of possible military action, while a U.S. naval group has entered the region.

Iran is the fourth-largest oil producer in OPEC, pumping about 3.2 million barrels per day.

“The arrival of a U.S. aircraft carrier group in the Middle East, alongside renewed rhetoric from President Donald Trump regarding Iran, has increased uncertainty around regional stability. Traders are factoring in the possibility of disruptions, even as broader supply forecasts still point to a surplus later this year,” said Vijay Valecha, Chief Investment Officer, Century Financial.

The Federal Reserve kept interest rates unchanged on Wednesday, citing signs of resilience in the U.S. economy. Lower borrowing costs generally make oil cheaper for consumers, boosting demand and lending support to prices.

“A weaker U.S. dollar is providing an additional tailwind. The recent slide in the greenback has boosted the appeal of dollar-denominated commodities, helping oil hold near a four-month high,” he added.

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Production disruptions in the United States support prices

Oil prices were also underpinned by weather-related production disruptions in parts of the United States, along with a surprise decline in U.S. crude inventories that briefly eased concerns about oversupply.

“A severe winter storm sweeping across the U.S. is estimated to have knocked out roughly 2m barrels per day, or about 15 percent of national output, over the weekend. Crude and LNG exports from Gulf Coast ports reportedly fell to zero on Sunday, tightening near-term supply expectations,” Valecha added.

The unexpected drawdown in stockpiles in the world’s largest oil-consuming nation further supported prices. U.S. crude stockpiles dropped by 2.3 million barrels to 423.8 million barrels in the week ended January 23, the Energy Information Administration said on Wednesday, defying analysts’ expectations for a 1.8 million-barrel increase.