Oil prices rise amid strong US demand data and escalating Mideast tensions

By Duygu Alhan

Oil prices increased on Wednesday following data showing a rise in US crude oil inventories and escalating geopolitical conflicts. However, forecasts from the Organization of Petroleum Exporting Countries (OPEC) predicting stronger production and weaker demand limited further price gains.

International benchmark Brent crude rose 0.7% to $81.25 per barrel at 10:44 a.m. local time (0744 GMT), up from the previous session's close of $80.69.

US benchmark West Texas Intermediate (WTI) increased 0.7% to $78.92 per barrel, following a close of $78.35 in the prior session.

Both benchmarks were supported by data released late Tuesday by the American Petroleum Institute (API), which showed a 5.2 million barrel decrease in US crude oil inventories, surpassing market expectations of a 2 million barrel draw.

This decline in US commercial crude oil reserves indicated strengthening domestic demand and contributed to the upward movement in prices. Official figures from the Energy Information Administration are expected later today, with any confirmed decrease in inventories likely to push prices higher.

Ongoing global geopolitical tensions are also impacting prices, particularly concerns over supply disruptions.

The United States Central Command reported on Tuesday that it had destroyed two Houthi vessels in the Red Sea, citing a "clear and imminent threat" to US and coalition forces in the region. This follows Yemen's Houthi group targeting Israeli-linked cargo ships in solidarity with the Gaza Strip amid ongoing conflict.

The Red Sea, a major route for oil and fuel shipments, has seen heightened concerns about supply disruptions due to these tensions, supporting higher prices.

The conflict between Ukraine and Russia is further influencing oil prices. Ukrainian President Volodymyr Zelenskyy stated that Ukrainian forces are advancing in the Kursk region, intensifying supply concerns.

OPEC's latest monthly report, however, forecasts a 185,000 barrels per day (bpd) increase in crude output for July, raising concerns about potential oversupply. Additionally, the organization has revised down its global oil demand growth forecast for 2024 by 135,000 bpd, further contributing to the limit on price increases.