NEW YORK: Despite an unexpected increase in US gasoline supplies, oil prices increased by almost 1% on Wednesday as investors became concerned that a possible escalation of the Gaza conflict may impair Middle Eastern crude supplies.
By 1835 GMT, Brent crude futures had increased by 22 cents, or 0.3 percent, to $85.23 per barrel. At $80.90 a barrel, US West Texas Intermediate oil futures ended the day 7 cents higher.
Hezbollah in Lebanon and Israel are at odds over borders, and in recent weeks, tensions between the two groups have grown, fueling worries of a full-scale conflict that would involve other regional players like Iran, a significant oil producer.
According to Andrew Lipow of Houston-based Lipow Oil Associates, “the geopolitical risk premium has been coming back to the market as a war between Israel and Lebanon is likely to see [the] direct involvement of Iran, which would be a concern.”
Early in the day, oil prices dropped as the US Energy Information Administration (EIA) revealed that the nation’s crude oil reserves had increased by 3.6 million barrels last week, shocking Reuters-surveyed analysts who had anticipated a decline.
US stockpiles are increasing while inventories elsewhere are decreasing, according to Giovanni Staunovo, an analyst at UBS. Staunovo remarked, “I would call the oil market a tale of different stories.”
“Last week, there were decreases in oil inventories in Europe and Japan. It appears that the market is getting tighter, though not in the US just yet. UBS predicts an increase in oil prices during the next few weeks.
Concerns about sluggish US gasoline consumption during the nation’s busiest summer driving season have been raised by oil dealers.
