Oil prices rise as supply risks increase

28 Jun 2024 , 09:27 AM

Oil prices increased in early Asian trading hours on Friday, marking the third weekly increase in a row, as concerns about supply issues caused by growing geopolitical tensions and weather disruptions outweighed evidence of poor demand.

Brent crude futures for August settlement, which expire on Friday, climbed 15 cents, or 0.2%, to $86.54 per barrel. The Brent price for September was also up 0.2% to $85.44 per barrel.

U.S. West Texas Intermediate oil futures for August delivery increased 24 cents, or 0.3%, to $81.98 per barrel.

Oil prices rose despite signals of sluggish demand in the United States, the world’s largest oil consumer, as tensions between Israel and Lebanon’s Hezbollah increased. A escalating conflict in the Middle East might drag in Iran, one of the region’s main oil exporters.

On Thursday, the French foreign ministry expressed concern over the situation in Lebanon, while Turkey had previously stated its solidarity with Lebanon and requested cooperation from regional states.

Weather-related interruptions have also put strain on oil supplies, which is expected to grow in the coming weeks. FGE Energy stated on Friday that heavy rains had reduced Ecuador’s production by 100,000 barrels per day during the last week.

The United States Gulf Coast, which is home to the majority of the country’s energy and export infrastructure, may also be struck by bad weather in the coming days, with the National Hurricane Centre tracking at least one weather system that might become a cyclone and head towards the area.

Brent and WTI futures have risen 1.5% this week.

On the demand side, growing crude stocks in the United States and poor petrol consumption have restrained oil prices from rising further. Government figures released this week revealed an unexpected increase in crude stocks as gasoline demand fell.

However, anticipation of record travel over the July 4th weekend in the United States may boost petrol consumption and draw stocks.

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