(RTTNews) – Recovering from yesterday’s decline, crude oil rose on Tuesday as US naval forces began a build-up near Iran, while Lebanese and Yemeni militias pledged support to Iran, escalating tensions.
WTI crude oil for March delivery was last seen trading $1.61 (or 2.66%) higher at $62.24 a barrel.
Last month, unrest over the rising cost of living in Iran erupted into violent clashes between protesters and authorities.
Despite US President Donald Trump warning Iran not to use violent measures to stop the uprising, Iran responded harshly.
Labeling the protests as “foreign-instigated riots”, the regime arrested and killed thousands of civilians. Human rights groups estimate that more than 5,000 people were killed in clashes between security forces and protesters.
Authorities are reportedly raiding clinics and hospitals and detaining injured civilians undergoing treatment.
The head of Iran’s judiciary clearly stated that no leniency would be shown towards protesters, indicating that thousands of people could be executed without a fair trial.
After indicating that Iran wanted “leadership change”, Trump deployed US naval forces towards Iran.
Iran vowed to attack with full force to deliver a “regrettable response”. Hezbollah and Houthi militant groups have also offered to defend Iran.
Iran is the fifth largest crude oil producer in the OPEC alliance. In addition, Iran controls the Strait of Hormuz, a chokepoint for oil vessel transit.
A US-Iran war could disrupt Iranian oil production as well as global oil supplies.
Winter storm Fern, which hit the US last week, forced the closure of major crude oil production units.
JPMorgan reported that the US missed out by about 250,000 barrels per day (about 15% of the country’s total oil production), while the Permian Basin was hardest hit, with the Bakken Field and Oklahoma seeing severe declines.
Gulf Coast refineries are also facing problems due to the cold temperatures.
Cold weather is impacting both production and refining, leading to a significant decline in crude oil reserves.
In Kazakhstan, the Energy Ministry confirmed that oil production had resumed at the Tengiz oil field, with the Caspian Pipeline Consortium also saying it was back to full loading capacity at its Black Sea terminal.
Due to severe power cuts, oil production in Kazakhstan almost came to a halt for 10 days.
However, industry experts say production volumes are still below the levels recorded before the disruption.
JPMorgan expects the Tengiz oilfield to remain offline until January.
The OPEC+ alliance is scheduled to meet on Sunday, February 1. The cartel had earlier decided to maintain a freeze on production growth for the first quarter of 2026. Reports indicate that the group is set to maintain the existing moratorium.
While various international agencies have projected excess oil supply into 2026, the December inventory count for China showed that crude oil reserves rose to 2.67 million barrels per day from 1.88 million bpd in November.
Although China does not disclose the amount of crude oil it holds for strategic or commercial inventory reserves, experts estimate that China has absorbed excess crude oil.
The US Energy Information Administration will release its inventory data tomorrow.
The US Federal Open Market Committee is meeting today and tomorrow.
The US Federal Reserve is set to announce its decision on interest rates at the conclusion of the meeting on Wednesday.
Markets expect the Fed to maintain current rates (at 3.50% to 3.75%) and take time until the next meeting to analyze the trajectory of the economy before deciding whether to cut or raise rates.
The US Dollar Index was last seen trading at 96.22, down 0.82 (0.85%).
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