Brent oil, the international benchmark for Nigerian crude oil, remained steady on Thursday, hovering just below seven-week highs as the escalating conflict in the Middle East raised concerns over potential supply disruptions.
At the same time, the market eagerly awaits U.S. inventory data for further indications of demand trends.
August Brent crude rose 28 cents, or 0.3%, to $85.35 a barrel while the U.S West Texas Intermediate (WTI) oil gained 13 cents, or 0.2%, to $81.70 a barrel.
“There was no WTI settlement on Wednesday due to a U.S. public holiday, which kept trading subdued,” noted Ricardo Evangelista, an analyst at ActivTrades.
“However, oil prices are likely to remain supported around current levels due to a growing geopolitical risk premium driven by conflict in the Middle East.”
Israeli forces have intensified their operations in the Gaza Strip, targeting areas in the central region overnight while tanks advanced into Rafah in the south.
The escalating violence has heightened fears of a broader conflict that could impact oil supplies from the region.
“Expectations of an inventory build appear to be overshadowing fears of escalating geopolitical stress for now,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Investors are keenly awaiting the release of U.S. inventory data from the Energy Information Administration (EIA) later on Thursday, delayed by a day due to the Juneteenth holiday.
An industry report released on Tuesday by the American Petroleum Institute (API) indicated that U.S. crude stocks rose by 2.264 million barrels in the week ending June 14, while gasoline inventories fell, according to market sources.
The summer season typically sees an uptick in oil demand due to increased refinery runs and weather-related risks.
“Ongoing production cuts by the OPEC+ group, combined with seasonal demand, should tighten oil balances and lead to inventory draws during the summer months,” J.P. Morgan commodities analysts wrote.
Refining margins have also improved, with the ICE gasoil futures premium to Brent crude jumping to $20.63 a barrel on Wednesday, a two-month high.
“Firmer fuel refining margins provide a healthy dose of encouragement for those expecting improvements on the demand side,” commented Tamas Varga, an analyst at PVM.
In other economic news, the Bank of England’s decision to keep its main interest rate unchanged at a 16-year high of 5.25% ahead of the national election on July 4 has been noted by market observers.
Higher interest rates generally increase the cost of borrowing, which can slow economic activity and dampen oil demand.
As the market braces for the upcoming EIA inventory report, analysts and traders are closely watching for any signals that could influence oil prices in the near term.
The delicate balance between geopolitical tensions and supply-demand fundamentals continues to play a critical role in shaping the oil market landscape.
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