Market moves
Oil climbed to a four-month high in Asian trading on Thursday as a combination of geopolitical concerns and weather-related supply disruptions pushed prices higher. By 20:38 ET (01:38 GMT), Brent futures for March were up 0.8% at $68.96 a barrel, while West Texas Intermediate futures rose 0.9% to $63.75 a barrel.
Drivers behind the rise
Traders increased the risk premium attached to crude following reports that U.S. President Donald Trump was weighing new military action against Iran, including possible strikes on Iranian leaders and on parts of its nuclear infrastructure. Earlier comments from the president urging Iran to reengage with the United States and abandon its nuclear ambitions were rejected by Tehran, which reportedly threatened retaliation.
News of U.S. naval deployments to the Middle East - with recent arrivals and claims that another armada was en route - added to market nervousness. Heightened tensions in the region prompted concerns about potential disruptions to Iranian crude output should conflict escalate, and market participants priced that possibility into crude valuations.
Cold weather impacts in the U.S.
At the same time, extreme winter weather across large parts of the United States has disrupted domestic crude production and export activity. Heavy snowfall and sub-zero temperatures forced outages that amounted to at least 2 million barrels per day of production being taken offline over the past week. Exports from the Gulf Coast were also reported as disrupted.
Such extended outages are expected to tighten U.S. oil availability. That outlook was reinforced by government data showing a surprising fall in inventories: U.S. oil stocks declined by 2.295 million barrels in the week to January 23, substantially larger than the 0.2 million barrel drop analysts had anticipated.
Currency effects
Dollar weakness provided additional support for oil. The greenback remained soft following the Federal Reserve's decision to leave interest rates unchanged, a move that had been widely expected by markets.
Implications
Together, geopolitical risk, weather-driven production outages and a softer dollar combined to lift crude to multi-month highs, as traders reassessed near-term supply risks. The unexpected inventory draw in U.S. government data intensified focus on how prolonged outages could tighten physical crude balances.
Note: This report reflects market developments and government data as reported. It does not include projections beyond those contained in the cited data and statements.