Oil unchanged as Middle East worry cancels US stock build

Houston — Oil prices were little changed on Wednesday after two consecutive days of losses, as the deadlock in Gaza ceasefire talks renewed uncertainty about the security of supply from the Middle East, offsetting a bigger-than-expected build in US crude inventories.

Brent crude futures were up marginally at $89.49 a barrel at 3.30am GMT, while US West Texas Intermediate (WTI) crude futures rose 8c to $85.31.

Prices for both benchmarks remain down around 1.8% on the end of last week despite geopolitical tensions in the Middle East triggered by the prospect of Israel’s war in Gaza lasting longer, and drawing in more countries.

“Some of the heat has come out of rally in crude oil in the early part of this week on hopes of a ceasefire in Gaza and higher US inventories,” said Tony Sycamore, a market analyst at IG in Singapore.

Hamas said on Tuesday that an Israeli proposal on a ceasefire in their war in Gaza did not meet the demands of Palestinian militant factions, but it would study the offer further and deliver its response to mediators.

If the conflict continues, it risks the involvement of other countries in the region, particularly Hamas backer Iran, the third-largest producer in oil cartel Opec.

Meanwhile, US crude stocks climbed last week by 3.03-million barrels, according to market sources citing American Petroleum Institute figures. Analysts had estimated that stocks would rise by about 2.4-million barrels.

Official US government inventory data is due at 2.30pm GMT.

However, all the risks remain to the upside, IG’s Sycamore said.

“Anything from a cooler-than-expected US CPI [consumer price index] tonight to another Ukrainian drone attack on Russian oil infrastructure to a response from Iran after Israel killed two of its generals in Syria last week is more than capable of reigniting the uptrend,” he said.

Separately, the government raised its forecast for US crude oil output, expecting an increase of 280,000 barrels a day (bbl/day) to 13.21-million barrels a day in 2024, up 20,000bbl/day from an earlier forecast from the US Energy Information Administration (EIA).

However, EIA said it expects Brent crude prices to average $88.55 a barrel in 2024, up from a previous forecast of $87 a barrel.

On Tuesday, both Brent and WTI fell more than 1%, as Israel-Hamas ceasefire discussions in Cairo continued.

The commander of the Revolutionary Guard’s navy in Iran said it could close the Strait of Hormuz if deemed necessary. About a fifth of the volume of the world’s total oil consumption passes through the strait daily.

Turkey said it would restrict exports of various products, including jet fuel, to Israel until there is a ceasefire. Israel said it would respond with its own curbs.

Reuters