Oil up over positive demand outlook, ongoing geopolitical risks in Middle East

By Duygu Alhan

Oil prices increased on Wednesday over a positive demand outlook in the US, the world's largest oil consumer, uncertainty about the timing of the US Federal Reserve's (Fed) rate cut, and escalating tensions in the Middle East, which threaten global oil routes.

International benchmark Brent crude was trading at 10.25 a.m. local time (0725GMT) at $84.62 per barrel, up 0.47% from the previous trading session's closing price of $84.22.

The American benchmark West Texas Intermediate (WTI) traded at $81.28 per barrel at the same time, a 0.55% rise from the previous session’s close of $80.83.

The market expects crude oil inventories in the US to decrease by 2.6 million. The US Energy Information Administration (EIA) will release official inventory data later in the day.

Prices are expected to rise even further if official data from the EIA show a drop in oil stockpiles.

Meanwhile, ongoing uncertainties over the timing of the Fed’s interest rate cut continue to influence prices.

Analysts noted that Fed officials want to see more evidence of inflation slowing down and expect growth data to be released on Thursday and personal consumption expenditure data due on Friday to give clues about the Fed's roadmap in the coming period.

Earlier on Tuesday, Fed Board Member Michelle Bowman said lowering the Fed's policy rate too soon or quickly could result in a rebound in inflation, necessitating future policy rate increases to return inflation to the central bank's 2% target in the long run.

Escalating geopolitical tensions in the Middle East, home to a vast majority of global oil reserves, also supported upward price movements by fueling market players' concerns over the possibility of a disruption in global energy supply routes.

An Iraqi resistance group announced early Wednesday that a combat drone had struck a target in Eilat, southern Israel.

The group, however, did not disclose the nature of the target, but stressed that they would "continue to destroy enemy (Israeli) strongholds."