Aug 7 2024: Oil prices climbed on Wednesday, buoyed by improved risk sentiment and escalating tensions in the Middle East, though they remained near seven-month lows due to ongoing concerns about economic growth and demand.
As of 08:05 ET (12:05 GMT), Brent crude futures were up 2.2% at $78.16 per barrel, while West Texas Intermediate (WTI) crude futures rose 2.4% to $74.97 per barrel.
The commodities market initially faced a broad sell-off, but renewed confidence on Wall Street has positively impacted oil sentiment. The improvement in broader market conditions has provided some support for crude prices.
Middle East Tensions:
Traders are closely monitoring developments in the Israel-Hamas conflict, particularly Hamas’s potential retaliation over the recent killing of its leader. Concerns about a wider conflict disrupting oil supplies have added upward pressure on prices.
U.S. Secretary of State Antony Blinken noted that there is a “clear consensus” among allies to avoid escalating the situation further.
Demand and Recession Concerns:
Despite the recent gains, oil prices remain near seven-month lows due to persistent worries about a potential U.S. recession impacting oil demand. Weak labor data and purchasing managers’ index readings from the U.S. have exacerbated these concerns, leading to a broader sell-off in commodities. Additionally, China’s economic struggles have raised fears of an oil market surplus by 2025.
The Organization of Petroleum Exporting Countries (OPEC) did not alter its production plans, which did little to support crude prices. Saudi Arabia and Russia have downplayed plans for increased production later this year.
U.S. Inventory Data:
The American Petroleum Institute (API) reported a smaller-than-expected increase in U.S. oil inventories for the week ending August 2, with a rise of 180,000 barrels compared to the anticipated 850,000 barrels. However, gasoline inventories grew by 3.3 million barrels, and distillates increased by 1.2 million barrels.
The rise in product inventories indicates a potential cooling of travel demand as the summer season ends. The official inventory data, which is due later on Wednesday, is expected to reflect similar trends.
