By Laila Kearney
Oil prices climbed on Wednesday as estimates showed shrinking crude and gasoline inventories, while tensions in the Middle East raised concerns about global oil supplies potentially being disrupted.
Crude futures rose by 30 cents to reach $80.99 a barrel, while U.S. West Texas Intermediate crude increased by 38 cents to hit $78.73 per barrel.
Market sources indicated that U.S. crude oil and gasoline inventories were expected to have fallen last week, with distillate stocks on the rise. The American Petroleum Institute data revealed a decrease of 5.21 million barrels in crude stocks, a 3.69 million barrel drop in gasoline inventories, and a 612,000 barrel increase in distillates.
The decline in inventories suggests a potential increase in demand in the U.S., the world's largest oil consumer. Official government data from the Energy Information Administration is set to be released later on Wednesday.
Concerns about the Middle East escalated as Iran vowed a harsh retaliation to the killing of a Hamas leader, attributing it to Israel. The U.S. Navy has positioned warships and a submarine in the region to bolster Israeli defenses. A broader conflict in the area could impact crude supplies from Iran and neighboring producer countries, potentially leading to tighter inventories and higher prices.
On the other hand, the International Energy Agency (IEA) maintained its 2024 global oil demand growth forecast but revised down its 2025 estimate due to the weakened Chinese economy affecting consumption.
Analysis:
The surge in oil prices due to shrinking inventories and escalating tensions in the Middle East can have significant implications for consumers and investors. As oil prices rise, consumers may experience higher costs for gasoline and other petroleum-based products, potentially impacting their overall expenses. For investors, the volatility in oil prices presents both risks and opportunities. Companies in the energy sector may benefit from higher oil prices, while industries reliant on oil as a key input may face challenges. Geopolitical tensions in the Middle East could further disrupt oil supplies, leading to increased market uncertainty. It is crucial for individuals to monitor these developments closely and consider the potential impact on their finances and investment portfolios.