Oil up after 3-day drop as some war-risk premium creeps back in
Investing.com - Crude prices rose for the first time in four days, with global benchmark Brent recapturing key $90 per barrel pricing, as traders braced for the possibility of contagion from the Israel-Hamas war that could disrupt oil traffic in the Middle East — despite little evidence of such impact.
The rebound came despite a surprise tick up in stockpiles of both crude oil and gasoline in the United States last week.
New York-traded West Texas Intermediate, or WTI, crude for December delivery, settled at $85.39, up $1.65, or 2% on the day. WTI had fallen just over 6% in three prior days.
UK-origin Brent crude for December delivery settled at $90.13, down up $2.06, or 2.3%. Brent was down nearly 5% over three prior sessions.
On the Israel-Hamas war front, Israeli forces battled on four fronts on Wednesday, striking targets in Gaza, the West Bank, Lebanon and Syria.
“It’s really hard to assign an appropriate war risk premium to crude now because the Middle East oil traffic hasn’t really been impacted by this conflict,” said John Kilduff, partner at New York energy hedge fund Again Capital. “Yet, concerns of a contagion remain, thus the reversion to risk on a day like this, when the market should probably be lower because of the build in US crude stocks.”
Surprise build in US crude oil, gasoline stocks
US crude oil stocks rose above the consensus of Wall Street analysts, with an unexpected rise at the federal level and at the storage hub tied to the delivery of contracts traded on the New York Mercantile Exchange, a government report showed Wednesday.
The build in crude inventories for the week ended Oct. 20 came after a drop in exports, the Weekly Petroleum Status Report of the Energy Information Administration, or EIA, showed.
The US crude inventory balance rose by 1.372 million barrels during the week ended October 20, according to the EIA, versus analysts' consensus for a drop of 0.45M barrels. The build contrasted with the 4.491 million draw in the prior week to October 13, which was helped by a spike in exports. Last week, crude oil exports fell to 4.833M barrels per day from a prior 5.301M.
Aside from the build in crude stockpiles at the federal level, there was also a rise of 0.213M barrels specifically at the Cushing, Oklahoma storage hub which serves as delivery point for US West Texas Intermediate crude futures traded on the New York Mercantile Exchange. Cushing storage levels have dropped drastically this year, prompting concerns they might reach such critical lows to complicate operations at the storage hub. In the prior week, the storage hub saw a net outflow of 1.005M barrels.
Higher stockpiles were noted in gasoline, the premier US fuel product, while distillates — a raw material for diesel and heating fuel — saw draws.
On the gasoline inventory front, there was a build of 0.156M barrels versus the prior draw of 2.371M and analysts’ consensus for a decline of 1.266M. Automotive fuel gasoline is the No. 1 U.S. fuel product.
With distillate stockpiles, there was a drop of 1.686M barrels on top of the prior week’s deficit of 3.185M and analysts’ consensus for a drop of 1.75M. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets.
(Ambar Warrick contributed to this)
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