By Arathy Somasekhar
Oil prices saw a slight increase on Thursday, recovering from over 1% losses in the previous session as inventories rose more than anticipated. Brent futures rose by 44 cents, or 0.59%, reaching $75.40, while U.S. West Texas Intermediate crude futures climbed 45 cents, or 0.64%, to $71.22. The ongoing exchange of heavy fire between Israel and Hezbollah has continued to raise concerns about oil supply in the market.
Brent is on track for a 3.2% gain for the week, with WTI set to rise by 2.9%. Last week, oil prices fell by over 7% due to worries about Chinese demand and easing concerns about potential disruptions in Middle East oil supplies.
U.S. crude inventories saw a significant increase of 5.5 million barrels last week, according to the U.S. Energy Information Administration, compared to analysts’ expectations of a 270,000-barrel rise.
The broader economic outlook in the U.S. remains stable, with minimal changes from September through early October. Recent trends have shown an increase in hiring, leading to expectations that the Federal Reserve will opt for a smaller 25-basis-point reduction in borrowing costs in the upcoming weeks.
Investors have become cautious due to a series of better-than-expected economic data on consumer spending, job gains, and inflation, causing them to scale back on expectations for U.S. rate cuts. Smaller rate cuts could potentially impact economic activity and oil demand.
Meanwhile, tensions remain high as Israeli strikes hit Beirut’s southern suburbs, and Hezbollah claimed to have fired precision-guided missiles at Israeli targets for the first time. The ongoing conflict has kept markets nervous about oil supply. As Washington pushes for peace between Israel and Iran-backed groups before the U.S. presidential election on Nov. 5, there is potential for significant changes in U.S. policy in the Middle East.
Analysis:
Oil prices have been volatile due to supply concerns and geopolitical tensions in the Middle East. The increase in crude inventories and expectations for smaller U.S. rate cuts have influenced market sentiment. Investors should monitor developments closely to assess the impact on their investments and financial decisions.