Oil prices rose in Asian trading on Wednesday despite a surprise increase in U.S. inventories due to geopolitical risks from the Middle East conflict and forecasts of inventory declines during the summer season, when demand peaks in the third quarter.
Brent crude futures rose 41 cents, or 0.48%, to $85.42 a barrel by 0613 GMT. WTI crude futures rose 46 cents, or 0.57%, to $81.29 a barrel.
Analysts had expected crude inventories to fall by about 3 million barrels last week, while U.S. crude inventories rose by 914,000 barrels in the week ended June 21, according to data from the American Petroleum Institute (API).
Markets appear to be shrugging off demand concerns for now and expecting inventory declines in the third quarter. The official Energy Information Administration (EIA) inventory figures will provide more clues about the market’s trend today. The EIA’s official US government data on oil and fuel stocks is due at 1430 GMT.
Despite near-term pressure from a stronger dollar and bearish US crude stock data, the market is likely to find support in the third quarter from continued OPEC+ cuts and stronger seasonal demand.
The global market is expected to be short about 1.5 million barrels per day in the third quarter due to continued OPEC+ cuts and stronger seasonal demand, which is usually seen in the third quarter. Signs of tightening are evident, along with a stronger North Sea physical market.
Analysts say front-month prices indicate strong physical demand for oil, which is a boon for prices in the near term. August Brent and WTI prices were around 80 cents a barrel higher than September prices.
Underlying oil market data suggests that the recovery in crude reflects a stronger underlying physical market. The pullback in Brent and WTI structures has strengthened in recent sessions, with major timeframes across all grades at their strongest levels since late April.
In addition, geopolitical risks, such as Houthi attacks in the Red Sea and escalating Israel-Hezbollah hostilities in Lebanon, are also bullish for oil prices.
The Houthi group has been launching drone and missile attacks on shipping lanes since November and says it stands in solidarity with Palestinians in Gaza in the Israel-Hamas war. The actions have disrupted shipping in the Red Sea corridor and fueled concerns about cargo flows.
The Houthis have so far sunk two ships and captured one, and on Tuesday they announced they had hit a ship in the Arabian Sea with a missile.
