Oil Surges As Iran Forbids Cooperation With UN Watchdog

Meanwhile, U.S. crude stockpiles skyrocket: File Image/Pixabay

Iran's sudden but hardly unexpected about face in refusing to cooperate with the United Nations nuclear watchdog caused oil prices on Wednesday to leap  forward by 3 percent, as analysts realized geopolitical tension could escalate just as quickly and severely as it had during the lead-up to Israel's attack on the Islamic republic.

Brent settled up $2.00, or 3 percent, to $69.11 per barrel, and West Texas Intermediate also settled up $2.00, or 3.1 percent, to $67.45 per barrel.

Iranian president Masoud Pezeshkian on Wednesday ordered his country to suspend its co-operation with the International Atomic Energy Agency, which followed a law passed by Iran's parliament to suspend that co-operation.

State television said, "This suspension will remain in effect until certain conditions are met, including the guaranteed security of nuclear facilities and scientists."

Israeli Foreign Minister Gideon Saar responded by declaring, "This is a complete renunciation of all its international nuclear obligations and commitments," and he called for a restatement of all UN sanctions on Iran originally lifted by Tehran's nuclear deal with world powers.

Soojin Kim, research analyst at MUFG Bank, said "Iran's decision to cut communication with UN nuclear inspectors has added fresh ambiguity to regional dynamics, despite signs of a temporary ceasefire agreement between Israel and Gaza."

Still, Kim went on to note that "Crude futures trading has quietened since recent geopolitical spikes, with focus now shifting back to fundamentals, including a possible Opec+ output hike this weekend and concerns about oversupply later this year."

Wednesday's gains came despite data from the Energy Information Administration confirming what had previously been reported by the American Petroleum Institute: a buildup in U.S. crude inventories of 3.85 million barrels, the largest increase in three months, and more than five times the 680,000 barrel increase projected by the API.

Robert Yawger, director of the energy futures division at Mizuho Securities USA, said, "Speculators who are already net-long are trying to protect their position; the problem is that they are running into a OPEC+ meeting with no place to hide over the long weekend."

The Organization of the Petroleum Exporting Countries is expected to agree to a fourth monthly major supply increase when it meets on Sunday to discuss the matter, as Saudi Arabia continues to try and reclaim market share.