Middle East conflict boosts oil prices despite large US crude buildup

Oil prices increased due to concerns about potential disruptions in Middle East oil supplies. A large increase in U.S. crude oil inventories limited the rise in prices. Iran launched a significant missile attack on Israel. Israel and the United States vowed to retaliate for the attack.

Israel may target Iranian oil production facilities in retaliation. Iran stated that it would retaliate for any Israeli response to the missile attack. An attack on Iranian oil infrastructure could lead to a retaliatory attack on Saudi oil facilities. Such attacks could significantly increase oil prices.

Israel deployed ground forces to southern Lebanon to confront Iran-backed Hezbollah. At a UN Security Council meeting, Israel and Iran threatened each other. A major escalation could involve the United States in the conflict. Iran’s oil production reached a six-year high in August.

U.S. crude oil inventories increased by 3.9 million barrels last week. Gasoline stocks rose, while distillate inventories fell. Iran’s oil output rose to a six-year high of 3.7 million barrels per day in August.

Offsetting some gains made during the week, U.S. crude inventories rose by 3.9 million barrels to 417 million barrels in the week ended Sept. 27, the Energy Information Administration said. This compared with analysts’ expectations in a Reuters poll for a 1.3 million-barrel draw. Gasoline stocks also rose last week, but distillate inventories fell.