Oil pared gains after US crude stockpiles increased, providing a buffer against heightened geopolitical risks in Israel and Gaza.
(Bloomberg) — Oil pared gains after US crude stockpiles increased, providing a buffer against heightened geopolitical risks in Israel and Gaza.
West Texas Intermediate traded below $84 as US inventories rose 10.2 million barrels, the biggest increase since February. Despite the gain, traders are still keeping a close eye on developments in Israel ahead of an expected ground assault into the Gaza Strip. Meanwhile, Saudi Energy Minister Prince Abdulaziz bin Salman said oil producers will continue to act to support the market preemptively.
As traders work to measure the risks to supply from the Israel-Hamas war, the US has also strengthened enforcement of restrictions on Russian crude. The Treasury Department sanctioned two companies and blocked ships accused of transporting Russian oil at prices above a cap instituted after its invasion of Ukraine. The move is a result of Russia having built its own fleet of vessels to sidestep the price cap.
“Any additional sanctions will be taken as bullish,” with demand currently outstripping supply, said Dennis Kissler, senior vice president for trading at BOK Financial Securities. “The only headwind I see is higher interest rates” and the potential for demand destruction if crude rises above $100 a barrel.
Despite the gains, crude experienced headwinds from the dollar after US inflation data came in slightly hotter than expected. Additionally, an International Energy Agency report showed signs that demand in some regions was being destroyed.
Oil has had a volatile week following the initial shock of the Hamas assault, with traders seeking to price in the potential repercussions. There are concerns that the conflict may spread across the region, endangering crude flows. In addition, prices have swung on data showing record-high US production and the possibility of a deal between the US and Venezuela that may boost crude flows.
This year, Saudi Arabia and Russia have spearheaded deep output cuts in a bid to drain inventories and boost prices. Their voluntary curbs have augmented a broader collective OPEC+ deal to pare production. The restrictions underpinned a major rally in the third quarter, with Brent at one point nearing $100 a barrel.
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