Oil prices eased from fresh two-month highs during Asian trade on Thursday, as growing geopolitical tensions in the Middle East sparked fears of supply disruption, boosting prices 4.3% overnight.
By 2:40 pm AEST (4:40 am GMT) Brent crude futures were down $0.27 or 0.4% to US$69.50 per barrel, while U.S. West Texas Intermediate (WTI) crude fell $0.21 or 0.3%, to US$67.94.
President Donald Trump said on Wednesday that U.S. personnel were being withdrawn from the Middle East because “it could be a dangerous place”, warning that the United States “would not allow Iran to have a nuclear weapon”.
According to a Reuters report, the U.S. is preparing for a partial evacuation of its embassy in Iraq and is permitting military dependents to leave multiple locations across the Middle East amid rising security concerns.
Iraq is the second-largest oil producer in the Organization of Petroleum Exporting Countries (OPEC) after Saudi Arabia. A U.S. official also confirmed that military families could leave Bahrain under the same directive.
Meanwhile, France 24 reported that Iran has threatened to strike U.S. military bases in the region should a conflict break out. Iran’s Defence Minister Aziz Nasirzadeh said Tehran would target American bases if nuclear talks collapse and war erupts with Washington.
President Trump has repeatedly warned Iran that the U.S. could resort to military force if a new nuclear agreement is not reached.
In addition to geopolitical risks, oil prices were supported by hopes of improved demand. Optimism surrounding a trade deal between the United States and China lifted sentiments, as any agreement between the world’s two largest economies could help revive global energy demand.
Supply-side fundamentals also lent support. U.S. crude stockpiles dropped by 3.6 million barrels to 432.4 million last week, according to data from the Energy Information Administration. The drawdown exceeded analysts' expectations for a 2 million barrel decline.
