Oil prices rose more than 1.5% in Asian trade, extending gains for a third day on Thursday, on increasing concerns that the US may carry out a military attack on key Middle Eastern producer Iran that could disrupt supply from the region.
Brent crude futures rose 99 cents, or 1.5%, to $69.39 a barrel.
US West Texas Intermediate crude climbed $1.06, or 1.7%, to $64.27 a barrel.
Both contracts have climbed about 5% since Monday and are at their highest since September 29.
Prices are rising as U.S. President Donald Trump has increased pressure on Iran to end its nuclear programme with threats of military strikes, and as a US naval group has arrived in the region.
Iran is the fourth-largest producer among the Organisation of Petroleum Exporting Countries with output of 3.2 million barrels per day.
Trump is considering options to attack Iranian security forces and leaders to inspire protests to potentially topple the current regime, Reuters reported on Thursday, citing US sources familiar with the discussions.
“Despite the Fed holding rates steady and a mild rebound in the US Dollar Index, oil prices remained resilient as escalating US-Iran tensions continued to underpin the supply-risk narrative,” said Phillip Nova’s senior market analyst Priyanka Sachdeva.
The Federal Reserve held interest rates steady on Wednesday amid signs of a healthy US economy.
Lower interest rates typically make it cheaper for consumers to buy oil, encouraging demand and supporting prices.
“Prices also found support from weather-related production losses in parts of the US, alongside a surprise draw in US crude inventories, which temporarily eased concerns of excess supply,” Sachdeva added.
An unexpected drop in crude stockpiles in the US, the world’s biggest oil consumer, also supported prices.
U.S. crude inventories fell by 2.3 million barrels to 423.8 million barrels in the week ended January 23, the Energy Information Administration said on Wednesday, compared with analysts’ expectations in a Reuters poll for a 1.8 million-barrel rise.
Some analysts were still forecasting higher prices for the next few months due to geopolitical risk premiums.
“The potential for Iran getting hit has escalated the geopolitical premium of oil prices by potentially $3 to $4 (per barrel),” analysts at Citi said in a note on Wednesday.
They added that further geopolitical escalation could push prices to as high as $72 a barrel for Brent.
