Oil prices stabilized on Wednesday, hovering close to their highest levels in nearly two months, driven by expectations of upcoming inventory reductions in the third quarter and heightened geopolitical tensions in the Middle East.
According to the American Petroleum Institute (API), U.S. crude oil inventories increased by 914,000 barrels on Tuesday. However, analysts anticipate a significant decline of nearly 3 million barrels in the official inventory data expected on Wednesday.
“The prevailing sentiment is that demand will ramp up during the summer months,” noted Tamas Varga, an oil broker at PVM. “Geopolitical factors continue to bolster this outlook.”
As of 0813 GMT, Brent crude oil futures edged up by 7 cents to reach $85.08 per barrel. Similarly, U.S. West Texas Intermediate crude futures saw a gain of 23 cents, or 0.3%, rising to $81.06 per barrel.
“The market appears to be dismissing current demand apprehensions, anticipating inventory reductions during the peak demand period in the third quarter,” remarked Suvro Sarkar, lead of the energy sector team at DBS Bank.
The Energy Information Administration is set to release official U.S. inventory data at 1430 GMT.
Analysts highlight that the strength observed in near-term prices reflects robust physical demand for oil, providing a supportive factor for prices in the immediate future. Prices for August contracts of Brent and WTI are approximately 80 cents per barrel higher than those for September contracts.
“Critical indicators in the oil market indicate that the rebound in crude prices mirrors a stronger underlying physical market,” wrote analysts at JP Morgan in a recent client update.
On the geopolitical front, escalating conflicts such as Houthi attacks on shipping in the Red Sea and intensifying hostilities between Israel and Hezbollah in Lebanon are further buoying oil prices, according to DBS’ Sarkar. The Houthis recently reported sinking two vessels and seizing another, while also claiming responsibility for a missile strike on a vessel in the Arabian Sea on Tuesday.
Related topics:
Asian Fuel Oil Spot Premiums Shift Amid Market Activity
U.S. Crude Oil Inventories See Unexpected Rise Amid Price Fluctuations
