Oil prices surged nearly $2 in early trading on Wednesday following industry data revealing a larger-than-expected decline in U.S. crude stocks. Concerns about potential supply disruptions from the Middle East, due to the deepening conflict between Israel and Hamas, contributed to the rise in prices.
Brent crude futures rose by $1.62, or 1.8%, reaching $91.49 per barrel at 0148, while West Texas Intermediate crude (WTI) futures increased by $1.77, or 2%, reaching $88.43 a barrel.
According to market sources citing American Petroleum Institute figures, U.S. crude stocks fell by approximately 4.4 million barrels in the week ending October 13. This significant decrease exceeded the analysts’ forecast of a 300,000 barrel draw.
The escalating tension in the Middle East followed a tragic incident where about 500 Palestinians lost their lives in an explosion at a Gaza City hospital on Tuesday. Both Israeli and Palestinian officials placed blame on each other for the incident.
U.S. President Joe Biden is scheduled to visit Israel on Wednesday to express support for the country in its conflict with the Palestinian Islamic Jihad militant group, Hamas. The White House stated that Biden will emphasize his desire to prevent the escalation of the conflict.
On the economic front, data expected on Wednesday is likely to show a slowdown in China’s economy during the third quarter, primarily due to weak demand, despite increased stimulus efforts. Meanwhile, U.S. retail sales exceeded expectations in September, leading to speculations about another interest rate hike by the Federal Reserve by the end of the year. Such rate hikes, aimed at curbing inflation, could potentially impact economic growth and reduce oil demand.
In other significant news, the government of Venezuela and its political opposition reached an agreement on electoral guarantees for the 2024 presidential elections. This development could pave the way for potential relief from U.S. sanctions, potentially boosting oil supplies. However, analysts caution that any increase in oil flow from Venezuela might take time due to a lack of investment in the country’s oil industry.