Oil prices saw an increase on Thursday, extending gains from the previous session due to heightened geopolitical tensions in the Middle East. The killing of a prominent Hamas leader in Tehran has raised concerns about the potential for a broader conflict in the region, which could disrupt oil supplies.
Price Movements
Brent Crude: Rose by 78 cents, or 1%, to $81.62 per barrel.
West Texas Intermediate (WTI): Gained 79 cents, or 1%, to $78.70 per barrel.
Both benchmarks had jumped about 4% in the previous session, reflecting the escalating concerns.
Geopolitical Tensions
The death of Hamas leader Ismail Haniyeh in Tehran follows the recent killing of a senior Hezbollah military commander in an Israeli strike in Beirut. These events have intensified fears that the ongoing conflict in Gaza could expand into a larger regional war, potentially disrupting oil supplies from the Middle East.
Vivek Dhar, an analyst at Commonwealth Bank of Australia, highlighted the risk that Iran might become more directly involved in the conflict, which could threaten its oil supply and infrastructure. The Strait of Hormuz, through which 15-20% of global oil supply passes, is seen as a critical point of concern.
U.S. Data and Dollar Impact
U.S. Crude Oil Stockpiles: Data from the U.S. Energy Information Administration (EIA) showed a 3.4 million barrel decrease in crude oil inventories, reducing stockpiles to 433 million barrels for the week ended July 26.
U.S. Dollar Index: The dollar weakened further on Thursday after the Federal Reserve’s recent decision to keep interest rates steady but open the possibility of a September rate cut. A weaker dollar generally boosts oil demand from foreign investors.
Concerns About Chinese Demand
Despite the short-term increase in oil prices, long-term outlooks remain cautious. Analysts, including Priyanka Sachdeva from Phillip Nova, note that concerns over Chinese demand are limiting potential price increases. Recent data showed a decline in China’s manufacturing activity, with official and private sector surveys indicating shrinking activity and reduced new orders.
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