Oil futures remained relatively stable early Thursday, hovering near their highest levels since late April, as U.S. traders resumed activity following a midweek holiday break and awaited official data on inventories.
Price Movements
West Texas Intermediate (WTI) crude for July delivery saw a slight increase, up by 1 cent to $81.58 per barrel on the New York Mercantile Exchange. The more actively traded August WTI contract remained flat at $80.71 per barrel. WTI did not settle on Wednesday due to the Juneteenth holiday. In contrast, August Brent crude, the global benchmark, rose by 23 cents, or 0.3%, to $85.30 per barrel on ICE Futures Europe.
Market Drivers
The recent recovery in oil futures, bouncing back from an early June selloff, has brought both WTI and Brent to their highest levels since late April. This rebound is partially driven by escalating geopolitical concerns. Continued Ukrainian drone attacks on Russian oil infrastructure and increasing hostilities between Israel and Iran-backed Hezbollah have intensified these fears. The Wall Street Journal reported that Israel’s military has approved plans for a potential invasion of Lebanon, heightening the risk of a broader conflict that could threaten crude oil supplies from the Middle East.
“These rising geopolitical tensions in Europe and the Middle East continue to support crude prices due to risks of disruptions to global supply chains. However, the increase in oil prices remains tempered by cautious remarks from U.S. Federal Reserve officials regarding interest rates and inflation trends,” noted Eman AlAyyaf, CEO of EA Trading, in a commentary.
Supply Data
The American Petroleum Institute (API) reported a 2.26 million barrel increase in U.S. crude inventories last week, according to sources citing the data. At the same time, gasoline stocks fell by 1.08 million barrels, and distillates rose by 538,000 barrels. The more closely watched data from the Energy Information Administration (EIA) is set to be released Thursday at 11 a.m. Eastern time, a day later than usual due to the Juneteenth holiday. Additionally, the EIA’s weekly data on natural gas supplies in storage will be released on Friday at 7:30 a.m.
Analysts, on average, expect the EIA to report a decline of 4.1 million barrels in crude supply for the week ending June 14, according to an S&P Global Commodity Insights survey. They also predict supply increases of 100,000 barrels for gasoline and 280,000 barrels for distillates.
Related Market Observations
As geopolitical tensions escalate in both West Asia and Europe, commodities like copper and crude have been experiencing significant price movements. For instance, copper has come off two-month lows, while crude oil maintains its position at seven-week highs.
Conclusion
The stability in oil futures reflects a complex interplay of geopolitical risks and cautious economic signals. While the threat of supply disruptions due to geopolitical tensions in Europe and the Middle East supports crude prices, these gains are moderated by the uncertain outlook on U.S. interest rates and inflation, as highlighted by Federal Reserve officials. Traders and investors are closely monitoring upcoming inventory reports from the EIA, which will provide further insights into market dynamics.