Oil prices edged lower on Thursday, after marking another 3-1/2 year high amid the worsening geopolitical dispute between Israel and Iran, which is further raising uncertainty on supply disruptions from the region.
International benchmark Brent crude futures was down by 0.03 percent to $77.19 per barrel, after hitting its highest since November 2014 of $78.00 earlier in the session.
West Texas Intermediate (WTI) futures was steady at $71.14 per barrel, after climbing as much as $71.89, which was close to the highs last recorded in 2014.
Iranian Forces Target Israeli Army Positions
Crude’s previous optimism came as a result of Iran’s missile barrage on the Israeli-occupied Golan Heights early in the day.
Israel Defense Forces spokesman Jonathan Conricus stated that 20 rockets were fired on Israeli army bases, with several of the missiles intercepted and zero casualties reported.
The attack marks as one of the biggest military clash between the two countries since the conflict began in 2011.
In response to Iran’s rocket strike, Israel said on Thursday that it has attacked nearly Iran’s entire military infrastructure in neighboring Syria. Iran has not yet commented on the matter.
US Pulling Out from Iran Nuclear Deal
President Donald Trump’s announcement about the US formally withdrawing from the 2015 Iran nuclear deal became the main driver for oil prices this week.
Trump stated that the highest level of economic sanctions will be restored against Iran, and that any nation will also face limits, if they help the country with its quest for nuclear weapons.
Some analysts feared that reinstating the sanctions might further tighten global oil supplies, as Iran would have more difficulty exporting oil. The limits have already taken away about half of the country’s oil exports.
The major Middle East oil producer and Organization of the Petroleum Exporting Countries (OPEC) member, returned to its role as a key oil exporter in January 2016, when international sanctions against Tehran were removed in exchange for limits on Iran’s nuclear program.
Shrinking Crude Supplies
Crude also rose earlier in the session, as stockpiles continued to shrink; with the Energy Information Administration (EIA) reporting nationwide inventories has dropped by 2.2 million barrels for the week ended May 4, surpassing analysts’ estimates of a 719,000 barrels decline.
The decrease in supplies came as oil imports experienced its biggest one-week decline since late February. Net crude imports went down by nearly 1 million barrels per day (bpd) to 5.4 million bpd.
The data also showed that domestic oil production, bolstered by shale extraction, marked a new all-time high of 10.70 million bpd last week. Russia is currently the only country the produces more by about 11 million bpd.
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