Oil prices rise on Gulf security risks, faltering US-Iran talks

Oil prices rose on June 3, extending gains from the previous session, as renewed hostilities in the Middle East and a lack of progress in diplomatic efforts between Iran and the United States heightened concerns over global supply disruptions.

Brent crude futures climbed 81 cents, or 0.8%, to $96.81 a barrel by 0330 GMT, while U.S. West Texas Intermediate (WTI) crude gained 91 cents, or 1.0%, to $94.67 a barrel, Caliber.Az reports, citing British media.

Both benchmarks settled at one-week highs on June 2.

The gains followed a fresh escalation in regional tensions after Iran launched ballistic missiles toward Kuwait and Bahrain. The U.S. military said the missiles failed to hit their targets and added that American forces carried out strikes on Iran’s Qeshm Island in response.

Market participants also remained focused on the status of negotiations between Washington and Tehran aimed at ending the conflict. Talks appeared to have lost momentum, with Iranian media reporting that Tehran had not communicated with Washington for several days, despite U.S. President Donald Trump saying discussions were continuing.

"The stalling in the U.S.-Iran negotiations and IEA warnings of critical global low stock levels are adding upward layers in risk premium in benchmark prices," said Emril Jamil, a senior analyst for oil at LSEG.

Additional support for prices came from concerns over tightening inventories. The head of the International Energy Agency’s oil industry and markets division warned on June 2 that global oil stocks could reach critically low levels ahead of the peak summer demand season if current inventory drawdowns continue.

Investors also monitored developments surrounding a proposed agreement under review by Tehran that could help halt the conflict.

Concerns over shipping through the Strait of Hormuz, a key global oil transit route, continued to underpin market sentiment.

"There has ⁠been a slight tick up in vessels attempting the journey, but total transits remain significantly below pre-conflict levels," said Daniel Hynes, senior commodity strategist at ANZ Bank.

According to Hynes, efforts to fully reopen the waterway face obstacles because Iran has mined large sections of the strait.

More than three months after U.S. and Israeli strikes against Iran, the conflict remains deadlocked despite a fragile ceasefire.

On the supply side, U.S. crude inventories declined for a seventh consecutive week, according to market sources citing data from the American Petroleum Institute released on June 2.

The sources said crude stockpiles fell by 6.8 million barrels in the week ended May 29.

Investors now await official U.S. government inventory data due later on June 3 for further indications of supply conditions in the world’s largest oil consumer.

By Aghakazim Guliyev