NEW YORK: Oil prices rose about one per cent on Wednesday despite a surprise jump in US gasoline supplies, as investors worried that a potential expansion of the fighting in Gaza could disrupt crude supplies from the Middle East.

Brent crude futures rose 22 cents, or 0.3pc, to $85.23 per barrel by 1835 GMT. US West Texas Intermediate crude futures settled 7 cents higher at $80.90 a barrel.

Cross-border strains between Israel and Lebanon’s Hezbollah have been escalating in recent weeks, stoking fears of an all-out Israel-Hezbollah war that could draw in other regional powers, including major oil producer Iran.

“The geopolitical risk premium has been coming back to the market as a war between Israel and Lebanon is likely to see [the] direct involvement of Iran, that would be a concern,” Andrew Lipow of Houston-based Lipow Oil Associates said.

Early in the session, oil prices fell after the US Energy Information Administration (EIA) reported a 3.6 million barrel jump in the country’s crude oil stocks last week, surprising analysts polled by Reuters who had expected a drawdown.

US stockpiles are rising while inventories elsewhere are declining, UBS analyst Giovanni Staunovo noted. “I would call the oil market a tale of different stories,” Staunovo said.

“We saw oil inventory draws in Japan and Europe last week. So it seems the market is tightening, just not yet in the US.” UBS expects oil prices to rise in the coming weeks.

Oil traders have worried about weak US gasoline consumption during the country’s peak summer driving season.

Published in Dawn, June 27th, 2024