Oil prices saw a slight increase in Asian trading on Wednesday, buoyed by geopolitical tensions in the Middle East and expectations of declining inventories during the peak third-quarter demand period.
Brent crude oil futures rose by 40 cents to $85.41 a barrel, while U.S. West Texas Intermediate crude futures gained 43 cents to reach $81.26 per barrel by 0406 GMT.
Suvro Sarkar, the energy sector team lead at DBS Bank, commented, “It seems the market is shrugging off demand concerns for now, anticipating inventory drawdowns in peak third-quarter demand season. Official Energy Information Administration (EIA) inventory numbers today will provide the market further pointers on the trend.”
The American Petroleum Institute (API) reported a surprise increase of 914,000 barrels in U.S. crude oil stocks for the week ending June 21, contrasting with analysts’ expectations of a nearly 3 million barrel decline, as per Reuters.
Official U.S. government data from the EIA on oil and fuel stockpiles is scheduled for release at 1430 GMT today.
Warren Patterson, head of commodities strategy at ING, noted, “Despite near-term pressure from a stronger dollar and bearish U.S. crude oil stocks data, the market is likely to find support from continued OPEC+ production cuts and heightened seasonal demand in the third quarter.”
Patterson added, “Our balance suggests the global market will be in a roughly 1.5 million barrels per day deficit in the third quarter due to continued OPEC+ cuts and stronger seasonal demand, typically observed during this period. We are already seeing signs of tightening with a stronger North Sea physical market.”
Geopolitical tensions have also played a role in bolstering oil prices. Suvro Sarkar from DBS highlighted, “Increasing geopolitical risks, including Houthi attacks in the Red Sea and rising Israel-Hezbollah hostilities in Lebanon, are contributing to bullish sentiment in oil markets.”
Yemen’s Houthi group, aligned with Iran, has conducted drone and missile strikes in the Red Sea since November, citing solidarity with Palestinians in Gaza amid the Israel-Hamas conflict. These actions have disrupted shipping in the Red Sea corridor, raising concerns over freight flow. The Houthis reported sinking two vessels and seizing another, with a recent claim of missile usage against a vessel in the Arabian Sea.
