Oil Prices Rise on US Crude Stockpile Draw and Middle East Tensions
In a dramatic turn of events, oil prices surged on Wednesday following industry data revealing a larger-than-expected draw in US crude stockpiles. The market also remained on high alert amid escalating tensions in the volatile Middle East, as reported by Reuters.
Brent crude futures saw a modest increase of 46 cents, equivalent to 0.5 percent, reaching $86.70 per barrel by 9:45 a.m. Saudi time. Similarly, US West Texas Intermediate crude futures climbed by 42 cents or 0.5 percent to hit $83.23 per barrel.
Despite Tuesday’s surge to their highest levels since April during intraday trading, both benchmarks closed lower for the day as concerns over Hurricane Beryl disrupting production in the Gulf of Mexico dissipated. The hurricane is anticipated to weaken into a tropical storm upon entering the Gulf of Mexico later in the week, according to the US National Hurricane Center.
Market strategist at IG, Yeap Jun Rong, remarked, “Having previously risen due to fears of supply disruptions from Hurricane Beryl, there might be a slight reversal as clearer information suggests a limited potential impact.”
He added, “Nevertheless, a substantial decrease in US crude inventories provided some price support, while tensions in the Middle East persist.”
Reports from market sources citing figures from the American Petroleum Institute indicated a significant 9.163 million barrel decrease in US crude oil inventories for the week ending June 28. However, gasoline inventories experienced a 2.468 million barrel increase, while distillates dropped by 740,000 barrels.
Analysts who participated in a Reuters poll had anticipated a 700,000-barrel draw in crude inventories, a 1.3-million-barrel decline in gasoline stocks, and a 1.2-million-barrel decrease in distillates stocks.
“Oil prices were propped up by the draw in US crude inventories, yet gains were capped as some investors aimed to capitalize on the recent rally that saw prices reach their highest levels since April,” noted analyst Mitsuru Muraishi of Fujitomi Securities.
The Energy Information Administration, the statistical branch of the US Department of Energy, is slated to release its weekly data on Wednesday at 5:30 p.m. Saudi time.
Conversely, with the arrival of the summer travel season and the upcoming Independence Day holiday, US gasoline demand is expected to surge. The American Automobile Association predicted that travel during the holiday period will be 5.2 percent higher than in 2023, with car travel seeing a 4.8 percent increase.
In the Middle East, Israeli forces launched attacks on various areas in the southern Gaza Strip on Tuesday, prompting thousands of Palestinians to flee their homes. Additionally, the Israeli military engaged in fire exchanges with the Lebanese armed group Hezbollah across Lebanon’s southern border.
Analyst Vivek Dhar from Commonwealth Bank of Australia cautioned, “The threat of an Israel-Hezbollah conflict, coupled with the potential for a broader Middle East turmoil, likely poses upward risks to our short-term outlook.”
A recent Reuters survey revealed that the Organization of the Petroleum Exporting Countries (OPEC) witnessed a rise in oil output in June for the second consecutive month. This increase was attributed to higher supply levels from Nigeria and Iran, which offset the impact of voluntary supply cuts by other members and the broader OPEC+ alliance.