London, Aug. 14, 2024 – Oil prices climbed on Wednesday after an industry report showed U.S. crude and gasoline inventories fell and as the market watched for a possible widening of the Israel-Gaza war, which may impact global oil supplies.
Brent crude futures rose 56 cents, or 0.7%, to $81.25 a barrel by 0540 GMT. U.S. West Texas Intermediate crude increased by 59 cents, or 0.8%, to $78.94 per barrel.
Key Middle Eastern oil producer Iran has not yet retaliated against the assassination of a Hamas official in its capital that it blames on Israel. But any escalation of the conflict in the Middle East is a clear upside risk to oil prices over the next six months and potentially even longer, said Vivek Dhar, analyst at Commonwealth Bank of Australia.
“The extent of Iran’s reprisal, as well as Israel’s response, will likely determine whether the current conflict in the Middle East broadens into a regional conflict,” said Dhar.
“The immediate market concern will be attacks on Iran’s oil supply and infrastructure. Iran accounts for 3-4% of global oil demand, of which, 25-50% is exported.”
Iran has vowed a severe response to the killing of the Hamas leader late last month. Israel has neither confirmed nor denied its involvement but it is fighting in Gaza against Hamas after the group attacked Israel in October. To counter Iran, the U.S. Navy has deployed warships and a submarine to the Middle East.
“If a broader conflict in the Middle East develops, this would likely threaten not only Iranian supply but also oil moving through key choke points in the Middle East,” said analysts at ANZ Research in a note on Wednesday.
“This could expose over 20 million barrels per day of oil to risks of disruption.”
U.S. crude oil and gasoline inventories fell last week, while distillate stocks rose, according to market sources, citing American Petroleum Institute data on Tuesday.
The API figures showed crude stocks declined by 5.21 million barrels in the week ended Aug. 9, the sources said, speaking on condition of anonymity. Gasoline inventories eased by 3.69 million barrels, and distillates rose by 612,000 barrels.
Falling inventories could indicate higher demand in the U.S., the world’s biggest oil consumer.
Official government data from the Energy Information Administration is due later on Wednesday.
Capping oil price gains however, the International Energy Agency (IEA), kept its 2024 global oil demand growth forecast unchanged on Tuesday but trimmed its 2025 estimate, citing the impact of a weakened Chinese economy on consumption. (Reuters)
