WTI Oil holds near seven-week lows sub-$87 despite US-Iran tensions

Crude prices are trading lower for the fifth consecutive day on Wednesday, with the US benchmark West Texas Intermediate (WTI) barrel trading at $86.60 at the time of writing, more than $4 down so far this week. A recent exchange of attacks between the US and Iran, which has posed additional pressure on an already frail ceasefire, has failed to provide any significant impulse to Crude prices.

Iran’s Islamic Revolutionary Guards Corps announced attacks on US bases in Bahrain, Jordan and Kuwait in retaliation for a US strike on defence and radar systems in Southern Iran. Meanwhile, reports of Israeli attacks killing six people in Southern Lebanon are complicating the situation even further.

The market, however, seems to be getting used to violations of the ceasefire and inflammatory comments from Tehran. Investors remain hopeful that the US and Iran want to avoid an all-out war and that a negotiated end to the war is possible, which is keeping Crude prices well below the key $100 level.

Later on Wednesday, the US Energy Information Administration (EIA) will release its weekly Oil Stocks Change report, which is expected to show the seventh consecutive decline, with a 4 million barrel drawdown in the week of June 5, following a nearly 8 million barrel drop in the previous week.

These figures show that commercial Oil reserves are reaching their lowest levels since 2003 and underline EIA Director Faith Birol’s comments warning about severe shortages in Crude supply during July and August as global stockpiles slump. The EIA report is likely to limit WTI's downside attempts.