Oil up over rising geopolitical risks in Middle East

By Sibel Morrow

Oil prices rose on Wednesday over concerns of escalating geopolitical tensions after Israel's attacks in the Palestinian enclave of Gaza, while a drop in US crude oil stocks also improved market demand optimism in the world’s largest oil-consuming country.

International benchmark crude Brent traded at $91.44 per barrel at 10.32 a.m. local time (0732 GMT), a 1.71% gain from the closing price of $89.90 a barrel in the previous trading session on Tuesday.

The American benchmark West Texas Intermediate (WTI) traded at the same time at $87.09 per barrel, up 1.93% from Tuesday’s close of $85.44 per barrel.

Concerns that increasing tensions in the Middle East will spill over into other regional countries and impair oil supplies drove price upticks.

According to the Palestinian news agency WAFA, more than 500 people were killed in the Israeli airstrike on the Al-Ahli Baptist Hospital in Gaza late Tuesday.

Any conflict between Iran and the US and Israel might jeopardize a successful outcome in the US-Iran nuclear deal, which would eliminate sanctions on Iran, including Iranian oil exports.

Fears of a breakdown in the normalization process between Saudi Arabia and Israel, both of which do not have formal diplomatic relations, also impacted oil prices.

Saudi Arabia called on the international community to cease dealing with double standards when it comes to “Israeli criminal practices.”

Riyadh insists that any agreement to normalize ties with Tel Aviv include a component to advance efforts to establish a Palestinian state, concessions that Israel has so far flatly rebuffed.

The deal, which would include a key mutual defense pact and weapons deal with Washington, would also see Saudi Arabia boost oil production next year.

Supporting further price increases and strong demand, the American Petroleum Institute (API) late Tuesday announced an estimated decrease of 4.4 million barrels in US crude oil inventories, against the market expectation of a draw of 1.3 million barrels.

The US Energy Information Administration (EIA) will release actual data on oil stocks later on Wednesday, and if the large stock decline is confirmed, prices could rise further.