Oil extends gains as Iran war fuels supply concerns

Oil prices rose on Thursday, August 20, as markets remained concerned that the deadlock in the U.S.-Israeli war against Iran would continue to disrupt supplies from the key Middle Eastern producing region and tighten global availability.

Brent crude futures for October delivery rose 26 cents, or 0.28%, to $91.87 a barrel by 0439 GMT. U.S. West Texas Intermediate (WTI) crude futures for September delivery gained 17 cents to $86 a barrel, while the more-active October WTI contract rose 12 cents, or 0.13%, to $89.91.

Both Brent and WTI benchmarks were on track for a fifth consecutive session of gains on Thursday, after settling on Wednesday at their highest levels since July 24. The September WTI contract expires later on Thursday, as per Reuters figures.

"Oil prices remained elevated as the market is supported by sporadic attacks in the Middle East but lacks fresh momentum without a major escalation," said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, a unit of Nissan Securities.

"The market is likely to maintain a gradual upward trend given uncertainty over peace talks and tensions involving the United Arab Emirates, Oman and Iran," he added.

The United Arab Emirates' decision to suspend all financial and economic transactions with Iran until further notice has refocused attention on strained relations between the major Gulf Arab oil producer and Iran.

On Tuesday, U.S. President Donald Trump said that no talks were taking place with Iran and that the Strait of Hormuz was open. Iran, however, said the waterway remained closed.

Shipping traffic through the Strait of Hormuz was unchanged on Wednesday from the previous day, according to the latest shipping data, as discussions aimed at ending the war between the United States and Iran remained deadlocked.

Before the war began on Feb. 28, shipments equivalent to about one-fifth of global oil consumption moved through the waterway. Current flows remain far below pre-war levels.

The conflict has also disrupted supplies of refined fuels and depleted inventories as less crude has been available to refiners.

U.S. stockpiles of distillate fuels, including diesel and heating oil, fell last week for a third consecutive week, the Energy Information Administration said on Wednesday.

Crude inventories, however, increased by 4.4 million barrels in the week ended Aug. 14, compared with analysts' expectations for a 600,000-barrel draw.

By Tamilla Hasanova