Oil Prices Rise Amid Supply Disruption Concerns and Geopolitical Tensions

Oil prices rose on Thursday as escalating tensions in the Middle East heightened concerns about potential disruptions to global supplies, overshadowing the previous day’s report of an unexpected increase in U.S. oil inventories.

As of 14:30 ET, crude oil prices climbed by 1.3% to $86.39 per barrel, while Brent crude increased by 1% to $81.74 per barrel.

Rising Tensions in the Middle East

Fears regarding the potential escalation of the Israel-Hamas conflict in Gaza have been supporting the oil market recently, given the region’s significance in global oil supply. Strains between Israel and Hezbollah in Lebanon have intensified in recent weeks, with Turkish President Tayyip Erdogan expressing solidarity with Lebanon and urging other regional nations to offer support.

This situation raises concerns that other influential regional players, particularly major oil producer Iran, may become involved in the conflict. Meanwhile, Israeli forces continue their military operations in Gaza against the Iranian-backed Hamas group.

Surprising Increase in U.S. Inventories and Gasoline Stocks

Recent government data indicated that U.S. oil inventories rose by approximately 3.6 million barrels in the week ending June 21, against forecasts that anticipated a decline of 2.6 million barrels. More concerning was a significant 2.7 million barrel increase in gasoline inventories, suggesting that fuel consumption may be weak despite the onset of the busy summer travel season.

The increase in inventories has raised worries about a potential slowdown in U.S. fuel demand, particularly as the nation faces persistent inflation and elevated interest rates. Analysts noted that despite lower refinery activity, gasoline stocks still grew by 2.65 million barrels, with implied gasoline demand declining by 417,000 barrels per day week-over-week. This trend poses challenges for gasoline demand as summer progresses.

However, recent assurances from Saudi Arabia and the broader OPEC+ alliance regarding their commitment to stabilizing the oil market have provided some reassurance to traders, according to a recent analysis from ANZ Research.