On Wednesday (June 26th), despite the unexpected increase in US gasoline supply, oil prices closed slightly higher because investors are concerned that the Middle East crisis may expand, causing a shortage of crude oil supply. # Crude Oil Closing #
WTI August crude oil futures rose 0.07 USD/barrel, up about 0.09%, closing at 80.90 USD/barrel. As of press time, it is now trading at 80.92 USD/barrel, up 0.11%.
(West Texas Intermediate (WTI) crude oil futures chart, source: FX168)
Brent crude oil futures rose 0.24 USD/barrel, or 0.3%, to close at 85.25 USD/barrel. As of press time, it is now trading at 84.36 USD/barrel, up 0.16%.
(Brent crude oil futures chart, source: FX168)
[Market News Analysis]
In recent weeks, the cross-border tension between Israel and Lebanon has escalated, causing concerns about the Middle East crisis and fears that other major oil-producing countries, including Iran, will be involved.
Andrew Lipow of Houston's Lipow Oil Associates said, 'The geopolitical risk premium has returned to the market because the war between Israel and Lebanon may lead to direct involvement of Iran, which is a worrying issue.'
Turkish President Erdogan called for regional support.
The attack of the Houthi armed group on a Red Sea ship supported oil prices. The organization claimed that in the joint military operation, they used multiple drones to attack a ship in Haifa port, Israel.
At the beginning of the session, the US Energy Information Administration (EIA) reported that US crude oil inventories increased by 3.6 million barrels last week, which surprised analysts surveyed by Reuters, who had expected inventories to decline, causing oil prices to fall.
"US stocks are increasing while stocks in other regions are decreasing," said UBS analyst Giovanni Staunovo. "I think the oil market has a different story. Last week we saw a decrease in oil stocks in Japan and Europe. So the market seems to be tightening, just not in the US yet." UBS expects oil prices to rise in the coming weeks.
UBS forecasts oil prices will rise in the coming weeks.
Oil traders are concerned about weak gasoline consumption during the US summer driving season.
US gasoline consumption accounts for about 10% of global oil consumption. Last week, the country's gasoline demand fell 3.6% compared with the same period last year, to about 8.9 million barrels per day. Although refineries have cut production, fuel inventories have unexpectedly increased.
The increase in inventory contradicts the expectations of longs, who had expected an increase in demand for crude oil and refined products during the US summer driving season. The broader financial market has also had a push-pull effect on crude oil. Stock market volatility has intensified crude oil volatility, while the strong US dollar (which reduces the attractiveness of US-dollar-denominated commodities) has increased bearish pressure.
"Mixed signals from the oil market make it difficult for oil prices to break through this trading range. We will understand the direction of oil prices in the coming months based on summer demand," said Rob Thummel, portfolio manager at Tortoise Capital Advisors.
Both futures and spot markets also show signs of oversupply. The WTI spot price difference has dropped from last week's high of $1.15/barrel to about $0.72/barrel. Meanwhile, due to weak overseas demand, the WTI Midland spot price in Houston's main hub fell to the lowest level since October.
Saudi Energy Minister emphasized that the recent OPEC+ agreement includes the option to suspend or reverse production changes, and oil prices are expected to rise monthly. Russia's oil exports fell the largest in more than three months, and continued conflicts in the Middle East and Ukraine pushed up oil prices. Later this week, traders will focus on US inflation data to find clues about future interest rate trends.