Oil Prices Rise Moderately as Global Supply Risks Counter US Demand Concerns, Reports Reuters

By Shariq Khan

Oil prices saw a modest increase on Wednesday, despite an unexpected rise in U.S. gasoline inventories, as concerns grew over the potential escalation of the Gaza conflict and its effects on crude oil supplies from the Middle East.

Brent crude futures increased by 24 cents, or 0.3%, closing at $85.25 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures gained 7 cents, reaching $80.90 per barrel.

Recent weeks have witnessed heightened tensions between Israel and Hezbollah in Lebanon, raising fears of a possible full-scale war that could involve other regional players, including Iran, a major oil producer.

“The geopolitical risk premium is re-entering the market, as a conflict between Israel and Lebanon could lead to direct Iranian involvement, which is concerning,” remarked Andrew Lipow, founder of Lipow Oil Associates in Houston.

Turkish President Tayyip Erdogan expressed his country’s support for Lebanon and urged regional nations to stand united.

Additionally, incidents of Houthi attacks on shipping in the Red Sea have provided upward pressure on oil prices. The group claimed responsibility for targeting a vessel at Israel’s Haifa port using drones in a coordinated operation with Iraqi forces.

During earlier trading, oil prices dipped following a report from the U.S. Energy Information Administration (EIA) that revealed a surprising increase of 3.6 million barrels in U.S. gasoline inventories last week, contrary to analysts’ expectations for a decline.

Analyst Giovanni Staunovo from UBS pointed out that U.S. stockpiles are rising, whereas inventories in other regions are decreasing. “The oil market tells different stories,” he commented. “Last week saw inventory draws in Japan and Europe, indicating a tightening market overall, though not yet in the U.S.”

UBS forecasts that oil prices will continue to rise in the coming weeks.

Traders are also concerned about the sluggish demand for gasoline in the U.S., particularly during the peak summer driving season. Gasoline consumption represents about 10% of total global oil usage, and last week’s demand in the U.S. was down 3.6% compared to the previous year, averaging around 8.9 million barrels per day. This occurred even as refiners reduced production.

“These figures are likely to disappoint those optimistic about gasoline,” Lipow stated. “Barring a hurricane, there are sufficient supplies for the summer driving season, especially with the July 4th holiday approaching.”