Oil Prices Dip Due to US Stockpile Build
On Thursday, oil prices took a hit as a surprise build in US stockpiles raised concerns about slow demand from the world’s top oil consumer. However, worries about a potential expansion of the Gaza war disrupting Middle East supplies helped cap the decline, as reported by Reuters.
Brent crude oil futures slipped 6 cents, or 0.1 percent, to $85.19 a barrel, while US West Texas Intermediate crude futures fell 10 cents, or 0.1 percent, to $80.80 per barrel, by 9:35 a.m. Saudi time. Despite a slight increase on Wednesday, both benchmarks faced downward pressure.
“An expected increase in US inventories of crude oil and gasoline are weighing on the market due to fears of weakening demand,” explained Tsuyoshi Ueno, senior economist at NLI Research Institute. However, the market remains in a balancing act, with concerns about potential supply disruptions from the escalating conflict between Israel and Hezbollah.
US Stockpile Data Surprises Analysts
The US Energy Information Administration reported a 3.6 million barrel jump in the country’s crude oil stocks last week, defying expectations of a 2.9 million-barrel drawdown. Gasoline stocks also rose by 2.7 million barrels, compared to the anticipated 1 million-barrel decrease.
Motor gasoline demand, a key indicator, fell by approximately 417,000 barrels per day last week to 8.97 million bpd, with a four-week average that is 2 percent lower than last year’s levels. Emril Jamil, a senior analyst at LSEG Oil Research, noted that weak US gasoline demand is limiting the market’s upside despite the summer driving season.
Concerns Over Gaza War Escalation
The ongoing conflict between Israel and Lebanon’s Hezbollah has raised fears of a broader regional war involving major oil producer Iran. Turkish President Tayyip Erdogan expressed solidarity with Lebanon and called for support from regional countries.
Israeli forces intensified their attacks across Gaza, with reports of intense fighting in Rafah. The uncertainty surrounding the situation in the Middle East continues to weigh on oil prices, offsetting the impact of the US stockpile build.