Oil slips as rising U.S. crude inventories offset attacks on UAE energy infrastructure

Oil prices slipped on Wednesday despite escalating attacks on the United Arab Emirates’ energy infrastructure, as rising U.S. crude inventories helped offset rising geopolitical risk premiums.

Prices of Brent, the international benchmark, declined 1.17% to $102.19 per barrel. U.S. oil prices fell 1.81%, to $94.56 per barrel as of 10:44 p.m. ET.

Market sources, citing API figures, told Reuters that U.S. crude stocks rose by 6.56 million barrels in the week ended March 13, well above the 380,000 additional barrels expected in a Reuters poll for the same period.

The pullback came even as fresh strikes in the UAE fueled fears of prolonged supply disruptions amid the Iran conflict. Recent incidents included a drone attack on the world’s largest ultra-sour gas facility, a fire at the Fujairah Oil Industry Zone, and damage to a tanker near the Strait of Hormuz.

The UAE reopened its airspace on Tuesday after a temporary shutdown triggered by drone strikes. Meanwhile, operations at the Shah gas field remain suspended following a separate drone attack that caused a fire, authorities said, with no reported injuries.

Located roughly 110 miles southwest of Abu Dhabi, the Shah field is operated by Abu Dhabi National Oil Co. and Occidental Petroleum. It has a capacity of over 1.28 billion standard cubic feet of gas per day and 4.2 million tons of sulfur annually.

Oil prices have also come under some pressure as the U.S. used bunker-busting bombs to destroy Iranian missile sites near the Strait of Hormuz, said Andy Lipow, president of Lipow Oil Associates.

“This is providing some optimism that we are getting closer to the day when tankers can safely restart transiting the waterway,” he told CNBC.

Citi said oil markets were likely to remain under pressure in the near term. In its base-case scenario, disruptions to flows through the Strait of Hormuz over the next four to six weeks could remove as much as 11 million to 16 million barrels per day from the market, pushing Brent crude to around $110 to $120 a barrel.

In a more severe scenario, Citi said a prolonged outage or broader attacks on energy infrastructure could drive prices to $130 on average in the second and third quarters, with spikes as high as $150 Brent or even $200 including refined products.