Oil touches seven-week high amid demand optimism, war concerns; brent crude at $85.53/bbl

Estimated read time 8 min read

Oil prices reached seven-week highs on Wednesday, driven by optimism about summer demand and concerns over escalating conflicts, despite an industry report indicating an unexpected rise in U.S. crude inventories.

Brent crude futures for August, set to expire on Thursday, increased by 20 cents to $85.53 a barrel by 12:35 GMT, while the more actively traded September contract rose by 21 cents to $84.74.

U.S. West Texas Intermediate crude edged up by 3 cents to $81.60 per barrel.

The Brent price being $8 above the lows reached in early June reflects genuine optimism that the global oil balance will eventually tighten.

Both benchmarks, which have recovered significantly over the past two weeks, rose by more than $1 in the previous session, reaching seven-week highs. This surge followed a Ukrainian drone strike that caused a fire at an oil terminal in a major Russian port.

What’s weighing on crude oil prices?

  • In the Middle East, Israeli Foreign Minister Israel Katz warned of a potential “all-out war” with Lebanon’s Hezbollah, despite U.S. efforts to prevent a broader conflict between Israel and the Iran-backed group. An escalating conflict poses a risk of supply disruption in this crucial oil-producing region.
  • Data from China this week revealed that May industrial output fell short of expectations, while retail sales, a measure of consumption, saw the fastest growth since February.
  • In the U.S., crude oil stocks increased by 2.264 million barrels in the week ending June 14, according to market sources citing American Petroleum Institute figures. Analysts surveyed by StuffsEarth had anticipated a decrease of 2.2 million barrels in crude stocks.
  • However, gasoline inventories declined by 1.077 million barrels, while distillate stocks increased by 538,000 barrels, the sources reported on condition of anonymity.
  • The U.S. Energy Information Administration is scheduled to release official stock data at 1500 GMT.

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Published: 19 Jun 2024, 09:36 PM IST

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