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Oil prices rose on Wednesday after industry data showed a bigger-than-expected draw in U.S. crude stockpiles, while the market kept tabs on flaring tensions in the Middle East.
Brent crude futures edged up 47 cents or 0.5% to $86.71 per barrel at 0330 GMT, touching a 10-week high. U.S. West Texas Intermediate crude futures climbed 43 cents or 0.5% to $83.24 per barrel but was not too far off a two-month high hit earlier this week.
Both benchmarks closed lower on Tuesday as fears faded that Hurricane Beryl would disrupt production in the Gulf of Mexico. It is expected to have weakened into a tropical storm by the time it enters the Gulf of Mexico late this week, according to the U.S. National Hurricane Center.
“Having gained previously due to fears of supplies disruption from Hurricane Beryl, there may be some unwinding as greater clarity points towards limited potential impact,” said Yeap Jun Rong, a market strategist at IG.
“That said, a significant drawdown in U.S. crude inventories offered some support for prices, while tensions in the Middle East continue,” Yeap added.
U.S. crude oil inventories fell by 9.163 million barrels in the week ended June 28, according to market sources citing American Petroleum Institute figures on Tuesday. However, gasoline inventories rose by 2.468 million barrels, and distillates fell by 740,000 barrels.
Analysts in a Reuters poll had expected a 700,000-barrel draw in crude inventories, a 1.3 million barrels drop in gasoline stocks, and a 1.2 million barrels fall in distillates stocks.
“Oil prices were supported by a U.S. crude inventories draw, but gains were limited as some investors were still seeking to take profits from the recent rally to reach the highest levels since April,” said Mitsuru Muraishi, an analyst at Fujitomi Securities.
The Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due to release its weekly data on Wednesday at 1430 GMT.
Meanwhile, U.S. gasoline demand is expected to ramp up as the summer travel season picks up with the Independence Day holiday this week. American Automobile Association has forecast that travel during the holiday period will be 5.2% higher than in 2023, with car travel up 4.8%.
In the Middle East, Israeli forces bombarded several areas of the southern Gaza Strip on Tuesday, with thousands of Palestinians fleeing their homes. The Israeli military and the Lebanese armed group Hezbollah have also been trading fire across Lebanon’s southern border.
“The risk of an Israel Hezbollah war, combined with the risk of a broadening conflict in the Middle East, likely means upside risks to our near term outlook,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia.
Meanwhile, the Organization of the Petroleum Exporting Countries’ (OPEC) oil output rose in June for a second consecutive month, a Reuters survey found on Tuesday, as higher supply from Nigeria and Iran offset the impact of voluntary supply cuts by other members and the wider OPEC+ alliance.
