The global crude oil market witnessed a slight uptick on Wednesday, June 26th, 2024, fueled by concerns over a potential escalation of the ongoing conflict between Israel and Hezbollah in Lebanon. This escalation, analysts fear, could disrupt crucial oil supplies from the Middle East, a major source of the world’s crude.
Brent crude futures, the global benchmark for oil prices, closed at $85.25 per barrel on Wednesday, reflecting a gain of 24 cents or 0.3%. Similarly, West Texas Intermediate (WTI) crude futures, the US benchmark, rose by 7 cents to settle at $80.90 per barrel.
The current situation in the Middle East builds upon existing anxieties stemming from attacks by the Houthi rebels in Yemen on Red Sea vessels. The Houthis recently claimed responsibility for a drone strike targeting a ship in the Israeli port of Haifa, further raising concerns about regional stability.
Inventory Data Creates Market Volatility
While geopolitical tensions provided upward pressure on prices, data released by the US Energy Information Administration (EIA) earlier in the day initially caused a dip. The EIA reported a surprise build-up of 3.6 million barrels in US crude oil inventories for the previous week. This contrasted with the expectation of a drawdown, which had boosted prices the week before.
The EIA report also revealed a gasoline inventory increase of 2.7 million barrels, compared to a drawdown of 2.3 million barrels reported the previous week. This, coupled with the larger-than-expected crude build, initially weighed on prices.
Oil Prices Tipped to Rise Amidst Demand Concerns
Despite the volatile inventory data, market analysts generally hold a bullish outlook for oil prices in the coming weeks. This optimism is fueled by the ongoing geopolitical tensions and the expectation of increased demand during the peak summer driving season in the United States.
However, a potential dampener on this bullish outlook comes from a recent decline in US gasoline consumption. According to data, gasoline demand in the US fell by 3.6% compared to the same period last year, reaching around 8.9 million barrels per day. This unexpected decline, even with refinery output cuts, led some oil traders to express concerns about overall demand strength.
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If You Ask Me
The global crude oil market currently finds itself in a state of flux. Geopolitical tensions in the Middle East are presenting a clear risk of supply disruptions, potentially pushing prices higher. However, fluctuating US inventory data and concerns about weak gasoline demand in the world’s largest oil consumer create a countervailing force.
In the coming weeks, market participants will closely monitor developments in the Middle East and the release of further inventory data from the US. These factors, along with the trajectory of US gasoline demand, will ultimately determine the direction of crude oil prices.
