Oil prices move higher in early trading on Friday as renewed threats by the United States to maintain an indefinite blockade of Iran revived concerns over crude supply and shipping through the Strait of Hormuz.
As at the time of writing, 5:30 am (WAT), Brent crude stood at $87.06 per barrel, down marginally by 0.01%, while WTI crude was trading at $81.28 per barrel, up 0.04%.
The modest movement came after oil prices fell sharply in the previous session, as a weaker global demand outlook and a substantial build in US crude inventories offset the supply risks created by the continuing disruption around the Strait of Hormuz.
Brent and WTI remained on course for weekly gains of about 4%, despite Thursday's decline of more than 2%. The market is being pulled between two competing forces: the threat of prolonged supply disruption in the Middle East and growing concerns over oil demand.
The latest geopolitical pressure followed warnings from Washington that it could sustain a naval blockade of Iran indefinitely and impose significantly tougher economic measures as ceasefire negotiations remain stalled.
The Strait of Hormuz remains at the centre of the market's supply concerns. The waterway handled about 20% of global oil supplies before the conflict, making prolonged restrictions on tanker movements a significant risk to crude and refined-product markets.
The situation has also been compounded by attacks involving vessels in the waterway. Two vessels belonging to the Abu Dhabi National Oil Company were reportedly attacked while transiting the Strait of Hormuz on Thursday, according to the UAE's state news agency, WAM.
However, the bullish impact of the geopolitical developments has been limited by weaker demand expectations from OPEC and the International Energy Agency, as well as a major increase in US crude inventories.
The Energy Information Administration reported a 17.4 million-barrel increase in US commercial crude inventories for the week ended August 7, the largest weekly build in more than three and a half years. The increase pushed commercial stocks to 424.4 million barrels.
Analysts say the competing supply and demand pressures have left the market supported but unable to sustain a decisive move higher. Rystad Energy's senior vice-president for oil commodity markets, Susan Bell, said the geopolitical backdrop was preventing a sharper decline despite the bearish inventory data.
KCM chief market analyst Tim Waterer similarly described the two forces as counterweights, noting that the market remained supported but was struggling to move significantly higher while supply risks and weaker demand expectations continued to offset each other.
For the oil market, the immediate focus remains on the Strait of Hormuz, the direction of US-Iran negotiations and whether restrictions on tanker traffic persist. A prolonged disruption would keep supply risks elevated, while a meaningful de-escalation could quickly ease the geopolitical premium currently supporting crude prices.