Oil prices experienced an upward trend on Wednesday, driven by a combination of domestic inventory data and international geopolitical tensions. Brent crude futures saw a rise of 46 cents, or 0.5%, reaching USD 86.70 per barrel, while U.S. West Texas Intermediate crude futures climbed by 42 cents, also 0.5%, to USD 83.23 per barrel, as of 0645 GMT.
The increase comes on the heels of industry data revealing a significant draw in U.S. crude stockpiles. According to figures from the American Petroleum Institute, U.S. crude oil inventories decreased by 9.163 million barrels in the week ending June 28, far exceeding analysts’ expectations of a 700,000-barrel draw. This substantial reduction in inventories has provided support for oil prices, despite increases in gasoline inventories and a slight decrease in distillates.
Market attention has also been focused on the developing situation in the Middle East. Recent Israeli military actions in the southern Gaza Strip, coupled with ongoing exchanges between Israeli forces and Hezbollah along Lebanon’s southern border, have heightened concerns about potential supply disruptions. Vivek Dhar, an analyst at the Commonwealth Bank of Australia, noted that these geopolitical risks likely present upside potential to near-term oil price outlooks.
The oil market’s reaction to these factors comes after a brief period of uncertainty related to Hurricane Beryl. While both Brent and WTI benchmarks had initially risen to their highest levels since late April due to fears of production disruptions in the Gulf of Mexico, these concerns have largely subsided as the storm is expected to weaken before reaching the region.
In the United States, the approaching Independence Day holiday is anticipated to boost gasoline demand as the summer travel season kicks into high gear. The American Automobile Association has projected a 5.2% increase in overall travel compared to 2023, with car travel specifically expected to rise by 4.8%.
On the supply side, a recent survey indicated that OPEC’s oil output increased in June for the second consecutive month. This rise was primarily attributed to higher production from Nigeria and Iran, which offset the impact of voluntary supply cuts by other OPEC members and the broader OPEC+ alliance.
As the market digests these various factors, all eyes will be on the Energy Information Administration’s weekly data release, scheduled for 1430 GMT on Wednesday. This report is expected to provide further clarity on U.S. oil inventories and could potentially influence price movements in the short term.