Oil futures: Crude recovers on heightened Middle East tensions
Quantum Commodity Intelligence – Crude oil futures Thursday were higher as focus pivoted back to geopolitics, after investors shrugged off the latest US oil inventory data that had derailed the more positive momentum.
Front-month Aug24 ICE Brent futures were trading at $86.36/b (1830 GMT), compared to Wednesday's settle of $85.25/b and close to the intraday high of $86.50/b having failed to consolidate above the $86/b mark earlier in the week.
At the same time Aug24 NYMEX WTI was trading at $81.75/b, versus Wednesday's settle of $80.90/b.
Prices had rebounded to around two-month highs amid heightened tensions in the Middle East, while rhetoric increased after a senior minister said Israel had the capability to send Lebanon back to the "Stone Age".
"We do not want war, but we are preparing for every scenario," Israeli Defense Minister Yoav Gallant told reporters in Washington. "Hezbollah understands very well that we can inflict massive damage in Lebanon if a war is launched."
Inventories
Data from the US Energy Information Administration (EIA) Wednesday revealed that commercial crude oil inventories unexpectedly increased last week as refinery throughputs eased for a second week.
Commercial inventories were marked 3.6 million barrels higher through the week to 21 June, confounding expectations for a drop of 2.8 million barrels, with non-government stockpiles now standing at 460.7 million barrels, up 1.5% year-on-year.
US gasoline inventories also increased last week as implied demand fell below 9 million bpd, while output swelled even as refinery runs eased back for a second week.
"The market was more disappointed with the rise in fuel product inventories. Gasoline stockpiles rose by 2,654,000 bpd despite the summer driving season kicking off. Implied demand for the road fuel subsequently fell 390,000 bpd to 8.97 million bpd," commented ANZ commodity strategist Daniel Hynes.
Gasoline inventories grew to a three-month high of 233.9 million barrels, the fourth build in five weeks, and are now around 5% above the same time last year.
Meanwhile, weather watchers were a monitoring a tropical wave designated 95L traveling across the Atlantic, which has the potential to move into the Gulf of Mexico late next week.
Range
Oil benchmarks continue to trade within a relatively narrow range, with tight OPEC+ supply management keeping the market in deficit in the second half of 2024.
"Crude oil continues to trade within a narrowing range, which during the past year has resulted in a succession of lower highs and higher lows," said Ole S Hansen, Head of Commodity Strategy at Saxo Group.
"In fact, since Q4-2022 the WTI futures contract has been averaging close to $79/b, just a couple of dollars below the current price, and overall it highlights how production restraint by OPEC+ since April last year has helped deliver a period of stable prices," noted Hansen.
