Oil Prices Increase Amid Declining U.S. Inventories and Middle East Tensions

Oil prices rose due to a decrease in U.S. fuel inventories and heightened tensions in the Middle East. Brent crude and WTI prices increased following a significant drawdown in distillate inventories, despite a rise in crude inventories. Ongoing conflicts and potential diplomatic talks may impact future oil supply and prices.

Oil prices experienced a notable increase during early trading on Thursday, attributable to a decrease in U.S. fuel inventories alongside escalating tensions in the Middle East. Brent crude futures ascended by 40 cents, equating to a 0.57% rise, reaching $71.18 per barrel, while U.S. West Texas Intermediate (WTI) crude prices increased by 34 cents, or 0.51%, to $67.50 per barrel.

The uptick in oil prices followed the release of U.S. government data indicating a larger-than-anticipated reduction in distillate inventories for the preceding week. Specifically, distillate inventories, encompassing diesel and heating oil, declined by 2.8 million barrels, surpassing the predicted decrease of 300,000 barrels per a Reuters poll.

Conversely, U.S. crude inventories reported an increase of 1.7 million barrels, which exceeded the expected rise of 512,000 barrels. Additionally, global risk premiums intensified following Israel’s initiation of a ground operation in Gaza on Wednesday, effectively ending a two-month ceasefire.

Moreover, the United States continued its airstrikes against Houthi targets in Yemen as a response to the group attacking vessels in the Red Sea. Former President Trump has stated his intention to hold Iran accountable for any future Houthi attacks.

Ukrainian President Volodymyr Zelenskiy expressed on Wednesday that an immediate cessation of strikes on energy infrastructure in the ongoing war with Russia may become feasible, suggesting that both parties might be progressing towards a ceasefire aimed at relaxing sanctions and reinstating Russian oil supplies to the market.

Additionally, Trump’s Middle East envoy, Steve Witkoff, announced that discussions between Russian and U.S. officials aimed at concluding the conflict are scheduled to occur in Saudi Arabia on Sunday. In the Americas, Chevron’s CEO requested a 60-day extension from the Trump administration to finalize operations in Venezuela, according to a report from the Wall Street Journal. Venezuela’s state-run oil entity, PDVSA, reportedly plans to continue oil exports through its joint venture with Chevron.

In summary, oil prices have risen due to a drop in U.S. fuel inventories and escalating tensions in the Middle East. The U.S. government reported a significant decline in distillate inventories, while crude inventories unexpectedly increased. Global geopolitical developments, including military actions in Gaza and airstrikes in Yemen, further infused risk into the market. Potential diplomatic efforts involving discussions on the Russia-Ukraine conflict may influence future oil supply dynamics. Additionally, operational changes concerning Chevron’s activities in Venezuela are also noteworthy.

Original Source: www.cnbc.com