WTI leaps hits $85 amid tighter geopolitical tensions

As the Middle East conflict heats up again, WTI Crude Oil is back up the daily charts. Requests for a cease-fire so that civilians could receive humanitarian aid were turned down.

EIA barrel counts increased more than anticipated, and as geopolitical concerns accelerate, demand concerns will affect the price of crude oil. Wednesday’s spike in West Texas Intermediate Crude Oil is being caused by the ongoing escalation of geopolitical tensions.

US crude inventories increased by 1.371 million barrels in the week leading up to October 20th, significantly exceeding the 0.239 million-barrel market expectation and offsetting a large portion of the previous week’s -4.491 million barrel drawdown, according to Energy Information Administration (EIA) barrel counts.

The Organization of the OPEC member states have drastically reduced their production, which has caused the global crude oil markets to fear a severe undersupply. However, slowing global growth is reducing the demand for fossil fuels, which is limiting topside movements in barrel prices.

As the week goes on, energy markets will be closely monitoring the situation in the Middle East. UN fuel supplies in Gaza are expected to run out either today or tomorrow, and investors in barrels will be cautious about any potential spillover into the nearby Strait of Hormuz, where nearly a fifth of all global crude production passes through the chokepoint.

Before rising to $85.07 at the time of writing, WTI Crude Oil experienced an intraday low of $81.90. At this point, US-centric oil barrels are trading close to $84.00 per barrel.

US Crude Oil has halted a fall that has seen WTI bids close lower for three straight trading days, despite Wednesday’s panicked spike. WTI is still down over 6% from its peak of $89.64 set last Friday.

WTI is still cycling around its 50-day Simple Moving Average (SMA), but it is currently trending higher and the early October low of $80.63 serves as a barrier to any further declines.

Oil prices rose about 1% on Wednesday on worries about the conflict in the Middle East escalating. Limiting gains, the United States reported increased crude stockpiles as demand worries stemming from gloomy economic prospects in Europe weigh.

Brent futures rose $1.07, or 1.21%, to $89.14 a barrel. Weaker prices in the oil physical markets suggest the rise in prices over the past few weeks may come to an end as demand woes weigh.

US crude inventories rose by 1.4 million barrels in the last week to 421.1 million barrels, the Energy Information Administration reported on Wednesday, higher than analysts’ expectations in a Reuters poll.

The crude build is a bit of a surprise and gasoline demand is barely hanging in there. US inventories declined unexpectedly by about 2.7 million barrels in the week ended on Oct. 20, according to market sources citing American Petroleum Institute figures on Tuesday. The European economic numbers haven’t been good, which could be affecting demand.

Growth indicators across Europe, including purchasing managers’ surveys, industrial output data, and sentiment readings in recent weeks, all point to the Eurozone’s economy currently contracting or stagnating due to a combination of high interest rates, weak external demand, and consumer caution.

According to data released on Wednesday by the European Central Bank, bank lending in the Eurozone almost completely stopped last month, adding to the growing body of evidence suggesting that the 20-nation bloc was averting recession.