Oil prices edged higher on Thursday on worries about supply disruption that were stoked by mounting geopolitical tensions in the Middle East and Europe, while an unexpected uptick in U.S. crude and gasoline stockpiles capped gains. Brent crude oil futures were up 45 cents, or 0.53 per cent, to $85.70 a barrel. U.S. West Texas Intermediate crude futures rose 32 cents, or 0.4 per cent, to $81.22. On Wednesday, both benchmarks settled slightly higher. Cross-border strains between Israel and Lebanon’s Hezbollah have been escalating, fanning fears that a widening war could draw in other countries including major oil producer Iran. The French foreign ministry said France is extremely concerned about the situation in Lebanon and called for restraint. Any contagion could have a big impact on crude supplies from the Middle East, said Panmure Gordon analyst Ashley Kelty.
Turkish President Tayyip Erdogan said his country stood in solidarity with Lebanon and called on the region’s countries to show support. Israel stormed a neighbourhood in Gaza City, telling Palestinians they must head south. Israeli forces bombed the southern city of Rafah in what it called final stages of an operation against Hamas militants. In Europe, Russia is considering a possible downgrade of relations with the West due to deeper involvement of the U.S. and its allies in the Ukraine war, but no decision had yet been taken, the Kremlin said. Downgrading relations – or even breaking them off – would illustrate the gravity of the confrontation between Russia and the West over Ukraine following escalating tensions over the war in recent months. The U.S. Energy Information Administration (EIA) reported a 3.6 million-barrel weekly jump in crude oil stocksk. Analysts polled by Reuters had expected a drawdown of 2.9 million barrels. “Yesterday’s EIA report is still an overhang for the market today as it was a surprise in terms of the builds we saw, and the refinery run rates,” said John Kilduff, partner at Again Capital.
U.S. gasoline stocks rose by 2.7 million barrels. Analysts had expected a 1 million-barrel draw. “We are right now at the peak of the summer driving season, with gasoline and diesel demand peaking as people travel over the July 4 weekend, so for markets to be moving sideways now, then we may well even see a dip after the holiday weekend,” said Tim Snyder, economist at Matador Economics. In Europe, independently held gasoline stocks in storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub rose by over 9% in the week to Thursday, data from Dutch consultancy Insights Global showed, suggesting limited scope for transatlantic U.S. gasoline demand. Meanwhile, comments from Atlanta Fed President Raphael Bostic in a policy essay released on Thursday reiterated expectations of an interest rate cut in the fourth quarter of this year, in line with investors’ expectations of cuts starting in September. “There is certainly nothing we can hang our hats on in terms of the Fed looking to juice the markets again,” Again Capital’s Kilduff said.
REUTERS