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Oil prices climbed on Wednesday, driven by a decline in U.S. crude and gasoline inventories and concerns over potential escalations in the Israel-Gaza conflict that could impact global oil supplies.
By 0540 GMT, Brent crude futures had increased by 56 cents, or 0.7%, to $81.25 a barrel. Similarly, U.S. West Texas Intermediate crude rose by 59 cents, or 0.8%, to $78.94 per barrel.
The market is closely monitoring developments in the Middle East, particularly the possibility of Iran retaliating for the recent assassination of a Hamas official in Tehran, which it attributes to Israel. While Iran has not yet responded, analysts like Vivek Dhar from the Commonwealth Bank of Australia warn that any escalation could drive oil prices higher over the next six months or longer.
In response to rising tensions, the U.S. has deployed additional military assets, including warships and a submarine, to the Middle East as a deterrent.
In the U.S., the American Petroleum Institute (API) reported a significant drop in crude oil and gasoline inventories last week, with crude stocks falling by 5.21 million barrels and gasoline inventories decreasing by 3.69 million barrels. This decline suggests stronger demand in the U.S., the world’s largest oil consumer. However, distillate stocks saw a slight increase of 612,000 barrels.
Despite the bullish factors, oil price gains were tempered by the International Energy Agency’s (IEA) decision to maintain its 2024 global oil demand growth forecast while slightly reducing its 2025 estimate. The IEA cited concerns over a weakened Chinese economy affecting oil consumption as a key factor in its outlook.
