Investing.com — Oil prices edged higher Thursday as concerns over Middle East tensions weighing on global supplies overshadowed a surprise build in U.S. inventories.
At 07:35 ET (11:35 GMT), Brent oil futures rose 0.4% to $84.81 a barrel, while West Texas Intermediate crude futures gained 0.4% to $81.25 a barrel.
Middle East tensions rise
Concerns over the potential for the Israel-Hamas war in Gaza to spread throughout the Middle East, an oil-rich region, has provided underlying support for the market for some time now.
Cross-border strains between Israel and Lebanon’s Hezbollah have been escalating in recent weeks, and Turkish President Tayyip Erdogan added to these by saying his country stood in solidarity with Lebanon and called on the region’s countries to show their support.
This raised fears other regional powers could be drawn into the conflict, including major oil producer Iran.
Meanwhile, Israeli forces continued to bombard Gaza, in its prolonged war with the Iranian-backed Hamas militant group
US inventories unexpectedly grow, gasoline inventories surge
Government data released on Wednesday showed that U.S. oil inventories grew about 3.6 million barrels (mb) in the week to June 21, confounding expectations for a draw of 2.6 mb.
More worrying was a 2.7 mb build in gasoline inventories, which indicated that fuel consumption remained weak even with the onset of the travel-heavy summer season.
The inventory build ramped up concerns that U.S. fuel demand was slowing, especially as the country grapples with sticky inflation and high interest rates.
“Despite lower refinery activity, gasoline stocks still increased by 2.65m barrels. Implied gasoline demand was weaker over the period, falling 417k b/d WoW. This will not help ease gasoline demand concerns as we move deeper into the summer,” analysts at ING said, in a note.
Strong dollar weighs on oil, economic cues awaited
A strong dollar – which hit a two-month high on Wednesday- has weighed on oil prices this week, making the commodity more expensive for foreign buyers.
A revised gross domestic product reading for the first quarter is due later on Thursday, but more closely watched will be Friday’s PCE price index, which is the Federal Reserve’s preferred inflation gauge.
Markets were also looking to the first U.S. Presidential debate, which is set to take place between Democrat and Republican candidates Joe Biden and Donald Trump later on Thursday.
(Ambar Warrick contributed to this article.)
