Oil Prices Hold Near Seven-Week Highs Amid Escalating Conflicts and Unexpected US Crude Inventory Build
Oil prices slightly eased during trade on Wednesday but remained near their highest levels in seven weeks. The market was grappling with concerns over escalating conflicts and demand worries following an unexpected build in US crude inventories, as reported by Reuters.
Brent Crude and US West Texas Intermediate Prices
Brent crude futures were down 17 cents at $85.16 a barrel by 9:35 a.m. Saudi time, while US West Texas Intermediate crude dropped 22 cents to $81.35 per barrel.
Ukraine-Russia Conflict Impact
Both benchmarks saw gains of over $1 in the previous session after a Ukrainian drone strike caused an oil terminal fire at a major Russian port, according to Russian officials and a Ukrainian intelligence source.
Israel-Hezbollah Conflict and Middle East Tensions
In the Middle East, Israeli Foreign Minister Israel Katz warned of a potential “all-out war” with Lebanon’s Hezbollah. The US tried to prevent a broader conflict between Israel and Iran-backed Hezbollah.
The escalating tensions in the region raised concerns that crude supply from key producers could be disrupted.
Market Strategist Insight
Market strategist Yeap Jun Rong from IG in Singapore highlighted the strong recovery in oil prices in the last two weeks due to potential disruption risks in a wider conflict between Israel and Hezbollah. The geopolitical tensions have brought oil prices to new highs.
Global Market Support and US Economic Data
ANZ Research analysts noted a broader risk-on tone across global markets supporting crude oil prices. Mixed US economic data for May has increased expectations of a Federal Reserve rate cut sooner rather than later.
Interest Rate Cut Impact
Interest rate cuts could lower borrowing costs, stimulate economic activity, and boost oil consumption. However, US crude stocks rose by 2.264 million barrels in the week ended June 14, contrary to analyst expectations of a draw.
Upcoming Official US Stocks Data
Official US stocks data from the Energy Information Administration are expected at 6:00 p.m. Saudi time.