Oil prices reached their highest levels since late September on Wednesday, driven by concerns regarding Iran, while a weaker U.S. dollar provided additional support.
Brent crude futures rose by 76 cents, or 1.12%, to $68.33 per barrel at 1:57 p.m. ET (1857 GMT). U.S. West Texas Intermediate (WTI) crude increased by 76 cents, or 1.22%, to $63.15 per barrel. Both benchmarks recorded their largest monthly percentage gains since July 2023, with Brent advancing approximately 12% and WTI about 10%.
On Wednesday, U.S. President Donald Trump encouraged Iran to engage in negotiations concerning nuclear weapons, stating that failure to do so could result in more severe consequences. In response, Tehran indicated it would retaliate more forcefully if faced with another attack. Additionally, the arrival of a U.S. aircraft carrier and supporting warships in the Middle East was confirmed earlier this week by U.S. officials.
Phil Flynn, Senior Analyst at Price Futures Group, commented, “The markets responded to concerns over the U.S. military presence, but moderated on potential peace prospects between Russia and Ukraine.”
Trilateral talks involving Russia, Ukraine, and the United States are scheduled to resume in Abu Dhabi on February 1, according to Russia’s Interfax news agency.
U.S. Crude Inventory Draw
Oil prices were further supported by an unexpected decline in U.S. crude oil inventories. The U.S. Energy Information Administration reported on Wednesday that national crude stocks decreased by 2.3 million barrels to 423.8 million barrels during the week ended January 23, contrary to analysts’ expectations for a 1.8 million-barrel increase, as per Reuters.
Giovanni Staunovo, UBS analyst, noted, “This is a solid report, featuring modest increases in gasoline and distillate inventories alongside a significant crude draw. Robust crude exports and reduced imports contributed to the continued decrease in crude stocks. The subsequent report will be particularly noteworthy to assess the impact of recent cold weather.”
Over the prior weekend, a winter storm affected much of the U.S., straining energy infrastructure and power grids. By Wednesday, domestic oil producers were restoring wells to operation, though national output remained down by approximately 600,000 barrels per day, equating to roughly 4% of total production.
A weaker U.S. dollar sustained elevated oil prices, with the currency approaching four-year lows against other major currencies (.DXY), thereby making dollar-denominated commodities such as oil more affordable for holders of alternate currencies. The U.S. Federal Reserve is anticipated to maintain current interest rates in its decision later on Wednesday.
Production disruptions in Kazakhstan also supported the price rally. The OPEC+ member hopes to gradually restore output at the Tengiz field within one week, though sources have indicated that the timeline may extend further. Meanwhile, pipeline operator CPC has reinstated full loading capacity at its Black Sea terminal following maintenance at a mooring point affected by drone activity, according to sources.