Oil Futures Climb on US-Iran Tensions

WASHINGTON (DTN) -- Oil futures on New York Mercantile Exchange and Brent crude on the Intercontinental Exchange firmed Wednesday, with both U.S. and international crude benchmarks adding more than 1% in value following reports the United States launched a cyber operation against Iran in retaliation for the Sept. 14 attack on Saudi oil facilities.

Wednesday afternoon, markets also eyed weekly supply data from American Petroleum Institute set for release at 4:30 p.m. EDT, with broad expectations for a fifth consecutive build in U.S. crude stocks during the week ended Oct. 11, while gasoline and distillate inventories are seen declining and the U.S. refinery run rate inching higher.

West Texas Intermediate November futures ended up $0.55 at $53.36 barrel (bbl) and the December Brent contract gained $0.68 to a $59.42 bbl settlement. November ULSD futures rallied 3.26 cents to settle at $1.9426 gallon and the November RBOB contract added 1.04 cents at $1.6248 gallon.

Oil complex posted strong gains in afternoon trade after Reuters reported an unnamed U.S. official said the Pentagon carried out a cyberstrike on physical infrastructure in Iran. The operation reportedly targeted Tehran's ability to spread "propaganda" and was in retaliation against an earlier attack on Saudi Arabia's oil infrastructure, which temporarily shut-in half of the kingdom's crude output. The United States, Saudi Arabia, Britain, France and Germany have publicly blamed the Sept. 14 attack on Iran, which denied involvement in the incident.

Geopolitical tensions escalated further Wednesday after Iranian President Hassan Rouhani said Tehran had video proof an oil tanker damaged off the coast of Saudi Arabia last week was attacked with rockets fired from a boat, leaving an option of some sort of retaliation on the table.

Separately, the U.S. economy expanded at a "slight to modest pace" in recent weeks, according to the Federal Reserve's Beige Book released Wednesday.

The Federal Reserve said "persistent trade tensions and slower global growth" continue to weigh on the domestic economy, as consumer and manufacturing activity deteriorated further. The Beige Book is used as the last snapshot of the U.S. economy by the Federal Reserve before they meet Oct. 29-30 to decide whether to cut interest rates for a third time this year.

Wednesday's release of the Beige Book also coincided with the latest reading on U.S. consumer spending, which unexpectedly fell 0.3% in September versus market calls for a 0.3% increase. For the Federal Reserve, the slowdown in consumer spending could strengthen the argument of doves who are pushing for more rate cuts.

Liubov Georges can be reached at liubov.georges@dtn.com

(BAS)