By Ken Afor
Oil prices inched up on Thursday due to growing concerns over the escalating conflict in the Middle East.
The region witnessed further attacks on Gaza and shipping in the Red Sea, which contributed to the rise in oil prices.
However, the gains were limited by an unexpected increase in U.S. crude stockpiles.
The prices of Brent crude futures increased by 48 cents, equivalent to 0.48%, reaching $77.17 per barrel at 0510 GMT.
Similarly, U.S. West Texas Intermediate (WTI) crude futures saw a rise of 32 cents, or 0.45%, reaching $71.69 per barrel.
However, these benchmarks experienced a decline in their values on Wednesday due to an unexpected surge in U.S. crude stockpiles, which raised concerns regarding the demand in the largest oil market.
However, concerns in the market reemerged following the most significant assault by the Houthis, based in Yemen, on commercial shipping routes in the Red Sea on Wednesday. Additionally, Israeli airstrikes in southern and central Gaza escalated on the same day.
Both the United States and Britain suggested that they would implement additional actions if the attacks persisted.
Furthermore, the UN Security Council approved a resolution urging an immediate cessation of the airstrikes.
“Oil prices seem to be in a state of indecision this week, as market participants attempt to digest a confluence of factors,” said Yeap Jun Rong, market strategist at IG, referring to geopolitical tensions in the Middle East, contradictory inventory reports in the U.S., and sluggish global economic growth.
“The latest EIA data serves as a dampener to the higher-than-expected drawdown in US crude inventories reflected in the API data yesterday, which drove some unwinding of earlier gains,” Yeap said.
The Energy Information Administration (EIA) reported that U.S. crude inventories (USOILC=ECI) rose by 1.3 million barrels in the week ending on January 5th, reaching a total of 432.4 million barrels.
This figure came as a surprise to analysts who had anticipated a decrease of 700,000 barrels. As a result, market participants are now closely monitoring U.S. inflation data, as it will play a crucial role in determining when the Federal Reserve may decide to lower interest rates.
“An unexpected rise in U.S. crude inventories prompted concerns about crude oil demand. But revised expectations for a rate cut should support oil prices, as the economy is slowing down lower than Fed forecast,” said Leon Li, analyst at CMC Markets.
“Oil prices may have support above $70 until we see more data demonstrating increased downward pressure on the economy,” said Li.
On Friday, China’s customs administration is set to release December trade data, providing a comprehensive overview of the overall demand in the world’s largest oil buyer for the entire year.
