WASHINGTON (dpa-AFX) - Rebounding from yesterday's decline, crude oil soared on Tuesday as U.S. naval forces have started building up near Iran while, Lebanese and Yemeni militias have pledged support to Iran, leading to the heightening of tensions.
WTI Crude Oil for March delivery was last seen trading up by $1.61 (or 2.66%) at $62.24 per barrel.
The unrest that erupted in Iran last month over the increasing cost of living turned into a violent clash between the protestors and authorities.
Despite U.S. President Donald Trump warning Iran not to use violent measures to curb the uprising, Iran responded harshly.
Dubbing the protests 'foreign-instigated riots', the regime arrested and executed thousands of civilians. Human rights groups estimate that more than 5,000 were killed in the clashes between security forces and demonstrators.
Authorities are reportedly raiding clinics and hospitals and taking injured civilians receiving treatment into custody.
Iran's chief of judiciary categorically asserted that no leniency will be shown to protestors, indicating that thousands could be hanged without a fair trial.
After hinting that Iran may want 'a change of leadership,' Trump deployed U.S. naval forces towards Iran.
Iran vowed to strike back with full force to deliver a 'regret-inducing 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 U.S.-Iran war could impede Iranian oil output as well as global oil supply.
The winter storm, Fern, that hit the U.S. last week compelled major crude oil production units to shutdown.
JPMorgan reported that the U.S. missed around 250,000 barrels per day (nearly 15% of the nation's total oil output), while the Permian Basin took the largest hit, with severe declines seen in Bakken field and Oklahoma.
Gulf Coast refineries are also facing issues due to freezing temperatures.
The cold weather that is denting both production and refining is expected to cause significant drawdowns in crude oil inventories.
In Kazakhstan, the energy ministry confirmed that oil production resumed at the Tengiz oilfield, with the Caspian Pipeline Consortium also stating that it had returned to full loading capacity at its Black Sea terminal.
A severe power outage had nearly crippled oil production in Kazakhstan for 10 days.
However, industry experts record that the output volumes are currently still lower than the levels registered before the disruption.
JPMorgan expects the Tengiz oilfield to remain offline through January.
The OPEC+ alliance is set to meet on Sunday, February 1. The cartel earlier decided to maintain a pause on production increases for the first-quarter 2026. Reports indicate that the group is set to maintain the current freeze.
While various international agencies have forecast excess oil supply in 2026, December inventory calculations for China revealed that crude oil stores jumped to 2.67 million barrels per day, up from 1.88 million bpd in November.
Though China does not reveal the volumes of crude it trades for strategic or commercial inventory reserves, experts speculate that China had soaked up much of the crude oil excess.
The U.S. Energy Information Administration releases its inventory data tomorrow.
The U.S. Federal Open Market Committee is meeting today and tomorrow.
At the conclusion of the meeting on Wednesday, the U.S. Federal Reserve is set to announce its decision on interest rates.
Markets expect that the Fed will maintain the current rates (at 3.50% to 3.75%) and would take time until next meeting to analyze the trajectory of economy before making a decision to lower or increase rates.
The U.S. dollar index was last seen trading at 96.22, down by 0.82 (0.85%).
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