April 11, 2024 [Market Watch]- Oil futures finished sharply higher on Wednesday, buoyed by speculation that Iran will soon wage an attack on Israel following Israel’s strike on Iran’s embassy in Syria earlier this month.

Traders have been concerned that more direct confrontation between Israel and Iran would likely have a significant impact in the oil-rich Middle East.

U.S. oil prices had been spending part of the session trading lower after official data from the Energy Information Administration revealed a larger-than-expected weekly rise in U.S. crude supplies.

Price moves

• West Texas Intermediate crude CL00, -0.12%for May delivery 1, -0.12% CLK24, -0.12% rose 98 cents, or nearly 1.2%, to settle at $86.21 a barrel on the New York Mercantile Exchange.
• June Brent crude BRN00, -0.09%BRNM24, -0.09%, the global benchmark, climbed $1.06, or 1.2%, at $90.48 a barrel on ICE Futures Europe.
• May gasoline RBK24, -0.07%rose 0.9% to $2.78 a gallon, while May heating oil HOK24, +0.13% added 1.1% to $2.71 a gallon.
• Natural gas for May delivery NGK24, -0.74%settled at $1.89 per million British thermal units, up 0.7%.

Middle East concerns

Oil prices saw a sharp rise late in Wednesday’s regular trading session, with Troy Vincent, senior market analyst at DTN, attributing the move up to reports that the U.S. and its allies were expecting major drone or missile strikes by Iran against Israel.

The U.S. and its allies believe that Iran or its proxies will strike military and government targets in Israel and that an attack is imminent.

For the week so far, however, oil futures were still trading lower after last week hitting their highest levels since October.

Talks toward a potential ceasefire between Israel and Hamas had served to cool worries somewhat about an escalation of hostilities in the region, analysts said.

“Bottom line, tensions remain elevated between Israel and Hamas and while ceasefire talks are as close as they have been yet, there remain risks of further escalation and a contagion effect in the region, particularly with Iran who recently threatened to close the Strait of Hormuz, which sees about 1/5th of the world’s seaborne oil trade flow through it,” said analysts in Sevens Report Research’s Wednesday newsletter.

The Wall Street Journal reported that Hamas largely rejected a U.S. plan for a temporary ceasefire in Gaza, planning instead to put forward its own road map for an end to the conflict with Israel.

Supply data

U.S. commercial crude inventories rose for a third week in a row, with the EIA reporting on Wednesday an increase of 5.8 million barrels for the week that ended April 5.

On average, analysts had forecast an increase of 2.9 million barrels, according to a poll conducted by S&P Global Commodity Insights. Late Tuesday, the American Petroleum Institute reported a crude inventory gain of 3.03 million barrels, according to a source citing the data.

The EIA report also showed weekly supply increases of 700,000 barrels for gasoline and 1.7 million barrels for distillates. The S&P Global Commodity Insights survey expected inventory decreases of 1.4 million barrels each for gasoline and distillates.

The “combination of a strengthening dollar amid an inflation print that came in hotter than expected and EIA data showing builds to U.S. crude, gasoline and diesel stocks” had put pressure on oil prices earlier Wednesday, DTN’s Vincent said.

“Gasoline imports, which had recently sunk to their lowest since 1999 for the seasonal period and were a leading cause of the draw to inventories in recent months, finally rebounded this week, leading gasoline stocks higher,” he said.

For crude stocks, however, “it was largely an export-related phenomenon,” Vincent said, with crude exports reportedly plummeting 1.3 million barrels per day on the week.

U.S. oil production was unchanged at 13.1 million barrels per day in the latest week, the EIA said, while crude stocks at the Cushing, Okla., Nymex delivery hub fell by 200,000 barrels to 33 million barrels.

Separately, in a monthly report issued Tuesday, the EIA raised its 2024 and 2025 forecasts for total world oil consumption and U.S. and global oil price.

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