Prices recover amid heightened Middle East conflict, but weak demand caps gains
07 August 2024 - 09:14
byNicole Jao and Colleen Howe
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
New York — Oil prices recovered in Asian trading on Wednesday on heightened Middle East tension, but gains were capped by weak demand.
Brent crude futures rose 17c, or 0.16%, to $76.60 a barrel by 6.15am GMT. US West Texas Intermediate crude rose 17c, or 0.23%, to $73.37.
Hamas named its Gaza leader Yahya Sinwar as successor to assassinated former chief Ismail Haniyeh on Tuesday, a move that reinforces the radical path pursued since the October 7 attack on Israel.
“The uptick in oil prices could possibly be driven by expectations of heightened supply risks due to rising Middle East tensions and a correction from the multi-month low of oil prices. The bearish demand sentiments still remain, and are expected to cap the upside on oil prices,” said Vortexa head of Asia oil analysis Serena Huang.
Supporting the bearish demand view, Chinese trade data showed that its July daily crude oil imports fell to the lowest level since September 2022.
The broader price recovery came after prices slipped earlier in the trading session, after US data showing an unexpected build in crude oil and petrol inventories.
US crude oil, petrol and distillate inventories rose last week, according to market sources citing American Petroleum Institute figures on Tuesday.
The API figures showed crude stocks were up by 176,000 barrels in the week ended August 2, the sources said, speaking on condition of anonymity. Analysts polled by Reuters had expected crude stocks to fall by 700,000 barrels.
Gasoline inventories rose by 3.313-million barrels against analysts’ expectations for a 1-million barrel draw, while distillate stocks rose by 1.217-million barrels, a bigger build than expected.
The US Energy Information Administration is due to release weekly inventory data at 2.30pm GMT on Wednesday.
On Monday, Brent futures slumped to their lowest since early January and WTI futures touched their lowest since February, as a global stock market rout deepened on growing concerns of a potential recession in the US, the world’s largest petroleum consumer.
However, both benchmarks broke a three-session declining streak on Tuesday as tensions in the Middle East stoked supply concerns.
Iran’s vow of retaliation against Israel and the US after the killing of two militant leaders has raised concerns that a wider war is brewing in the Middle East.
“Any escalation of the conflict in the Middle East could see a greater risk of disruptions to supplies from the region,” ANZ analyst Daniel Hynes said.
Lower production at Libya’s 300,000 barrel a day (bbl/day) Sharara oilfield is also adding to concerns of supply shortages.
Global oil inventories decreased by about 400,000bbl/day in the first half this year, according to US Energy Information Administration (EIA) estimates published on Tuesday. It expects stockpiles to decline by about 800,000bbl/day in the second half of the year.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil inch higher on Middle East tension
Prices recover amid heightened Middle East conflict, but weak demand caps gains
New York — Oil prices recovered in Asian trading on Wednesday on heightened Middle East tension, but gains were capped by weak demand.
Brent crude futures rose 17c, or 0.16%, to $76.60 a barrel by 6.15am GMT. US West Texas Intermediate crude rose 17c, or 0.23%, to $73.37.
Hamas named its Gaza leader Yahya Sinwar as successor to assassinated former chief Ismail Haniyeh on Tuesday, a move that reinforces the radical path pursued since the October 7 attack on Israel.
“The uptick in oil prices could possibly be driven by expectations of heightened supply risks due to rising Middle East tensions and a correction from the multi-month low of oil prices. The bearish demand sentiments still remain, and are expected to cap the upside on oil prices,” said Vortexa head of Asia oil analysis Serena Huang.
Supporting the bearish demand view, Chinese trade data showed that its July daily crude oil imports fell to the lowest level since September 2022.
The broader price recovery came after prices slipped earlier in the trading session, after US data showing an unexpected build in crude oil and petrol inventories.
US crude oil, petrol and distillate inventories rose last week, according to market sources citing American Petroleum Institute figures on Tuesday.
The API figures showed crude stocks were up by 176,000 barrels in the week ended August 2, the sources said, speaking on condition of anonymity. Analysts polled by Reuters had expected crude stocks to fall by 700,000 barrels.
Gasoline inventories rose by 3.313-million barrels against analysts’ expectations for a 1-million barrel draw, while distillate stocks rose by 1.217-million barrels, a bigger build than expected.
The US Energy Information Administration is due to release weekly inventory data at 2.30pm GMT on Wednesday.
On Monday, Brent futures slumped to their lowest since early January and WTI futures touched their lowest since February, as a global stock market rout deepened on growing concerns of a potential recession in the US, the world’s largest petroleum consumer.
However, both benchmarks broke a three-session declining streak on Tuesday as tensions in the Middle East stoked supply concerns.
Iran’s vow of retaliation against Israel and the US after the killing of two militant leaders has raised concerns that a wider war is brewing in the Middle East.
“Any escalation of the conflict in the Middle East could see a greater risk of disruptions to supplies from the region,” ANZ analyst Daniel Hynes said.
Lower production at Libya’s 300,000 barrel a day (bbl/day) Sharara oilfield is also adding to concerns of supply shortages.
Global oil inventories decreased by about 400,000bbl/day in the first half this year, according to US Energy Information Administration (EIA) estimates published on Tuesday. It expects stockpiles to decline by about 800,000bbl/day in the second half of the year.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.