Global oil prices climbed in early trading on Wednesday after fresh security incidents in the Strait of Hormuz reignited concerns over Middle East supply, overshadowing the latest production increase by OPEC+ and persistent signs of weakness in the physical crude market.
As at the time of writing 03:50 a.m. (WAT), Brent crude was trading at $75.96 per barrel, up 2.43%, while US West Texas Intermediate (WTI) crude rose 2.51% to $72.21 per barrel, reflecting renewed geopolitical risk premiums in the global oil market.
The latest rally followed reports that two commercial vessels transiting the Strait of Hormuz were struck by drones, reviving fears over the security of one of the world's most important oil shipping routes. Although the attacks did not completely halt vessel movements, traders responded by pricing in fresh supply risks after weeks of easing tensions between the United States and Iran.
The gains came despite OPEC+ reaffirming another production increase of 188,000 barrels per day for August, a move that leaves only 188,000 barrels per day of the group's voluntary production cuts yet to be restored. The alliance is expected to consider removing the remaining cuts at its next meeting scheduled for August 2.
Market analysts noted that while additional OPEC+ production would ordinarily weigh on prices, the slow recovery in crude exports through the Strait of Hormuz continues to limit the immediate impact of higher output targets. Shipping activity remains below pre-conflict levels as tanker operators and insurers maintain a cautious approach despite the temporary easing of hostilities.
Further adding to market uncertainty, Saudi Aramco announced one of the largest reductions in its official selling prices in decades, cutting August prices for Asian buyers by $11 per barrel. The move reflects weak demand from key Asian customers, particularly China, where purchases of Saudi crude have fallen sharply in recent months. The Kingdom also lowered prices for European buyers by as much as $15 per barrel, signalling increasing competition for market share.
Meanwhile, the United States reported another sharp decline in crude inventories held in its Strategic Petroleum Reserve (SPR). According to the US Department of Energy, SPR stocks fell by 6.2 million barrels to 319.5 million barrels, the lowest level since April 1983, highlighting the limited emergency stockpile available should supply disruptions worsen.
Elsewhere, geopolitical developments continue to reshape global energy flows. Iraq is accelerating production from major southern oilfields, Saudi Arabia is considering expanding its East-West pipeline to reduce dependence on the Strait of Hormuz, while Chevron has signed an agreement with Iraq to study alternative crude export routes that bypass the Gulf chokepoint entirely.
Although concerns over oversupply persist following OPEC+'s continued output increases, traders remain focused on geopolitical developments. Fresh attacks around the Strait of Hormuz, combined with ongoing uncertainty over Iranian exports and fragile shipping conditions, continue to support crude prices despite bearish demand fundamentals.
For Nigeria, sustained gains in international crude prices could strengthen government oil revenue. However, higher global oil prices may also influence domestic petroleum pricing in the coming weeks, particularly if refiners and marketers begin adjusting product costs in response to rising feedstock prices.