On Thursday, the price of oil futures increased. Brent crude oil futures rose by 1.34% to reach US$86.39 a barrel, while US West Texas Intermediate crude futures went up by 1.04% to US$81.74.The surge in prices was caused by apprehensions regarding possible disruptions in the worldwide crude supply as a result of growing geopolitical tensions in the Middle East and Europe.
Tensions between Israel and Lebanon's Hezbollah have been escalating across their shared border, causing concerns of a potential expansion of the conflict that may involve other nations, notably Iran, a significant oil producer. The French foreign ministry expressed profound apprehension regarding the situation in Lebanon and urged for the exercise of self-control.Ashley Kelty, an analyst at Panmure Gordon, cautioned that any spread of a disease or economic crisis may have a substantial effect on the availability of oil from the Middle East.
Turkish President Tayyip Erdogan expressed his support for Lebanon and called on the countries in the region to demonstrate their solidarity. Simultaneously, Israel forcefully entered a residential area in Gaza City, instructing Palestinians to go towards the southern region, and conducted airstrikes on the city of Rafah in what it referred to as the last phase of a military campaign targeting Hamas militants.
The military spokesman for the Iran-aligned militia, Yahya Saree, reported that the Houthis of Yemen attacked the "vessel Seajoy" in the Red Sea using a drone boat and missiles. The Houthi militia, which has sway over the most densely populated areas of Yemen, has been carrying out assaults on vessels in the waters adjacent to the country for several months as a show of support for Palestinians engaged in combat against Israel in Gaza.
The Kremlin has stated that Russia is contemplating the option of downgrading or severing its relations with the West in response to increased involvement by the US and its allies in the Ukraine conflict. However, no final decision has been reached at this time. This action would demonstrate the seriousness of the conflict between Russia and Western countries about Ukraine, which has been intensifying due to increased tensions surrounding the war in recent months.
The US Energy Information Administration (EIA) released data showing an unexpected increase of 3.6 million barrels in crude oil stocks for the week, which goes against the predicted decrease of 2.9 million barrels as anticipated by analysts. Gasoline inventories in the United States increased by 2.7 million barrels, exceeding experts' expectations of a 1 million-barrel decrease. John Kilduff, a partner at Again Capital, expressed his opinion on the EIA report, noting that it continues to negatively impact the market due to unexpected increases in inventory and refinery production rates.
Tim Snyder, an economist with Matador Economics, said that as the summer driving season reaches its highest point, the lack of significant movement in the markets could result in a decline following the July 4 weekend. The gasoline stockpiles held in storage at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub in Europe increased by more than 9% over the week until Thursday. This indicates that there is not much potential for transatlantic demand for US gasoline.
Atlanta Fed president, Raphael Bostic reaffirmed the anticipation of a reduction in interest rates during the fourth quarter of 2024. This aligns with the views of investors, who anticipate the commencement of rate decreases in September. Once again, Kilduff from Again Capital expressed that there is no solid evidence indicating that the Federal Reserve is planning to stimulate the markets.
Ultimately, the spike in oil prices on Thursday was mostly caused by apprehensions regarding probable interruptions in global petroleum supply resulting from growing geopolitical tensions in the Middle East and Europe, and an unexpected surge in US crude and gasoline stocks. Market participants are also expecting a reduction in interest rates during the final quarter of 2024.
