Tuesday, oil prices rose by 2% to a five week high. This was due to fears that the Middle East could be hit with more energy disruptions as a result of increased attacks between the U.S. Brent futures climbed $2.12 or 2.4% to $91.34 per barrel at 10:53 am EDT (1453 GMT). U.S. West Texas Intermediate Crude rose $1.80 or 2.2% to $85.03. Brent is on course to close at its highest level since June 10 and WTI, its highest level since June 11. Brent was technically overbought for the seventh consecutive day. After threats by Yemen's Iran aligned Houthis, two oil tankers transporting Saudi crude towards Asia reversed their course in the Red Sea. U.S. forces have bombed Iranian targets in the west and south overnight. Iran has also targeted U.S. sites located in Bahrain, Kuwait, and Jordan. At least one tanker in the Strait of Hormuz was also hit.

SEB Research said that "the optimist might see the latest American strikes as a last attempt to strengthen negotiating positions before a deal is struck and the Strait of Hormuz reopened."

"However, there is the risk of a prolonged stalemate with continuing uncertain energy flows, high oil prices, and repeated attacks." On Monday, the Houthis declared a naval blockade against Saudi Arabia. This increased the conflict and raised the risk to global energy and trade beyond Gulf. Shipping data from LSEG revealed that the two tankers which had loaded Saudi crude bound to China and India in this week made a U-turn and were heading toward Suez. Sources said that Saudi Arabia's Red Sea Port of Yanbu was operating normally.

Tim Waterer, KCM Trade, said that the Houthis' threats to blockade Saudi Arabia are important because they increase the risk of disruption for another major oil exporter. The Joint Organizations Data Initiative (JODI), which released data on Tuesday, showed that Saudi Arabia's crude oil exports fell for the third consecutive month in May. They reached a new record low. Fuel oil markets in Asia extended their gains on Tuesday, amid concerns about the Houthi threat to blockade Saudi Arabia via the southern gateway of the Red Sea.

U.S. OIL Inventories

The American Petroleum Institute (API), a trade group, released its weekly storage report on Tuesday. On Wednesday, the U.S. Energy Information Administration published theirs.

Analysts estimate that energy companies removed 0.5 million barrels from storage in the week ending July 17th.

If the data is correct, this would be the second consecutive 'week of declines'. This compares to a 'decrease of 3.25 million barrels during the same week in last year. And an average decline over the past 5 years (from 2021-2025) of 1.2million barrels. Reporting by Scott DiSavino, Stephanie Kelly, Anushree mukherjee, Ishaan arora, and Emily Chow, in Singapore. Editing by David Goodman and Emelia Sithole Matarise.

(source: Reuters)