Aug 14 2024: Oil prices saw a modest increase on Wednesday, supported by a report showing declines in U.S. crude and gasoline inventories and ongoing concerns over potential escalation in the Israel-Gaza conflict that could affect global oil supplies.
Brent crude futures rose by 32 cents, or 0.4%, reaching $81.01 per barrel by 0820 GMT. U.S. West Texas Intermediate crude gained 33 cents, or 0.4%, to $78.68 per barrel.
Danish Lim, an investment analyst at Phillip Nova, commented, “The American Petroleum Institute reported a significant decrease in U.S. crude inventories of 5.2 million barrels, surpassing the expected decline of 2 million barrels. This indicates that oil demand remains robust.” He added, “However, geopolitical risks, particularly the potential for escalating tensions in the Middle East, could drive oil prices higher in the coming weeks.”
Official data from the U.S. Energy Information Administration is expected later on Wednesday.
In the Middle East, a major oil-producing region, Iran has vowed retaliation for the killing of a Hamas leader last month. While Israel has not confirmed its involvement, it is engaged in conflict with Hamas in Gaza following attacks on Israel in October. The U.S. Navy has responded by deploying warships and a submarine to the region.
Vivek Dhar, an analyst at Commonwealth Bank of Australia, stated, “The extent of Iran’s retaliation and Israel’s response will likely influence whether the current conflict expands into a broader regional conflict.” He noted that the immediate market concern is the potential impact on Iran’s oil supply and infrastructure, with Iran accounting for 3%-4% of global oil demand, of which 25%-50% is exported.
ANZ Research highlighted that a broader conflict could jeopardize oil transportation through critical chokepoints in the region, potentially affecting over 20 million barrels per day.
However, oil price gains are being capped by the International Energy Agency’s recent adjustment of its 2025 oil demand growth forecast, reflecting concerns about reduced consumption due to a weakened Chinese economy.