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Published: October 26, 2023
Updated: October 26, 2023

Oil Markets: Middle East Tensions and Rising US Crude Stockpiles Influence Prices

Balancing Act in Oil Markets

Oil prices displayed little movement on Thursday as they navigated through mixed factors, with attention on Middle East tensions and consideration of an increase in U.S. crude inventories.

Brent Crude Holds Steady

Brent crude futures saw a slight dip of 3 cents to $90.10 a barrel at 0100 GMT, while U.S. West Texas Intermediate crude futures eased by 3 cents, settling at $85.36 a barrel.

Middle East Conflict Lingers

Benchmark oil contracts experienced a nearly 2% increase the previous day, driven by ongoing concerns regarding the situation in the Middle East. However, on Thursday, oil prices lacked a clear direction as investors pondered an increase in U.S. crude stockpiles, suggesting reduced demand.

US Crude Inventories Rise

The latest data from the Energy Information Administration revealed that U.S. crude inventories climbed by 1.4 million barrels, reaching 421.1 million barrels. This exceeded expectations, as analysts from a Reuters poll had anticipated a gain of only 240,000 barrels.

Middle East Jitters Ebb and Flow

Analysts from Citi remarked, "Markets remain volatile as Middle East jitters ebb and flow, but underlying fundamentals are seasonally weaker than expected with product demand in the U.S. surprisingly weak." This sentiment highlights the unpredictable nature of Middle East tensions and concerns about weakening demand.

Refinery Operations Show a Decline

The data from the EIA also indicated that refinery crude runs in the U.S. fell by 207,000 barrels per day. Additionally, refinery utilization rates saw a slight decrease of 0.5 percentage points, standing at 85.6% of total capacity.

Ongoing Middle East Monitoring

Investors are expected to remain vigilant regarding developments in the Middle East. Any escalation in the region could disrupt oil markets and impact supplies. Notably, Israel has postponed a potential invasion of Gaza to allow the U.S. to deploy missile defenses in the area to protect American troops.

Macroeconomic Concerns Persist

Furthermore, concerns related to macroeconomic factors continue to influence the outlook for oil demand. Recent euro zone business activity data showed an unexpected decline this month, further contributing to market uncertainty. Oil prices remain influenced by a delicate balance of factors, including Middle East tensions and fluctuations in U.S. crude stockpiles. The market's direction remains uncertain as it responds to these dynamics, all while keeping a watchful eye on developments in the Middle East and broader economic conditions.