Oil prices firm as Middle East risks offset US demand concerns

Worries over the potential for the Israel-Hamas war in Gaza spreading to Lebanon limited price gains

By Reuters

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Published: Thu 27 Jun 2024, 4:34 PM

Oil prices edged higher on Thursday as supply disruption risks from rising geopolitical tensions in the Middle East helped to counter demand fears after a surprise build in US stockpiles.

Brent crude oil futures gained 70 cents, or 0.82 per cent, to $85.95 a barrel by 1202 GMT. US West Texas Intermediate crude futures rose 57 cents, or 0.7 per cent, to $81.47.

Both benchmarks had settled slightly higher on Wednesday.

The US Energy Information Administration (EIA) reported a 3.6 million barrel jump in the country’s crude oil stocks last week. Analysts polled by Reuters had expected a drawdown of 2.9 million barrels.

US gasoline stocks also rose, increasing by 2.7 million barrels. That compared with analyst expectations for a 1 million barrel draw.

“The actual readings were nothing short of disappointing for bulls that look for a continued (market) tightening brought about by seasonal demand,” said PVM Oil analyst John Evans.

“If it were not for the steady and incremental ratcheting up of geopolitical risk in the Middle East, oil prices might have found themselves on the back end of a much more negative day.”

Worries over the potential for the Israel-Hamas war in Gaza spreading to Lebanon limited price gains.

Cross-border strains between Israel and Lebanon’s Hezbollah have been escalating in recent weeks, stoking fears of a war that could draw in other regional powers, including major oil producer Iran.

Were contagion to occur, it could have a significant impact on crude supplies from the Middle East, said Panmure Gordon analyst Ashley Kelty.