Oil prices rise on report of tanker attack off Oman

Brent crude up by almost 1% after news of drone strike

Oil prices have been volatile in recent weeks on slowing economic growth in China and looming Russia sanctions. EPA

Crude prices increased sharply on Wednesday after a report stated that an oil tanker was struck in an exploding drone attack off Oman.

Brent, the benchmark for two-thirds of the world’s oil, was trading 1 per cent higher at $94.78 a barrel at 12.46pm GST time on Wednesday. West Texas Intermediate, the gauge that tracks US crude, was up 0.6 per cent at $87.48.

The attack happened on Tuesday off the coast of Oman, the news agency reported, quoting a Middle East defence official.

Oil futures gained on Tuesday night on geopolitical concerns after a rocket suspected to be made in Russia fell on a Polish village and killed two people.

It is the first time that a Nato country has been struck by a missile since the start of Russia's invasion of Ukraine in February.

US President Joe Biden and German Chancellor Olaf Scholz said an investigation would have to be carried out before any conclusions were drawn about who was responsible for the attack.

The International Energy Agency lowered its global oil demand growth estimate for next year again on weak economic growth in China, Europe’s energy crisis and a strong dollar.

The Paris-based agency now expects oil demand to grow by 1.6 million barrels per day in 2023, down from its previous estimate of 1.7 million.

Global demand for diesel and gas oil is estimated to fall to 400,000 bpd in 2022, from 1.5 million bpd last year, before declining slightly in 2023, said the IEA, which blamed the reduction on “persistently high” prices and a slowing economy.

Diesel is the backbone of global economic activity and markets were already in deficit before the invasion of Ukraine in February.