By Arathy Somasekhar
HOUSTON (Reuters) – Oil prices rose about $1 on Wednesday after Israel attacked Hamas leadership in Qatar, Poland shot down drones in its airspace and the U.S. made a push for new sanctions on buyers of Russian oil, although concerns about excess crude supply capped gains.
Brent crude futures were up 99 cents, or 1.87%, at $67.37 a barrel, at 11:28 a.m ET (1528 GMT), and U.S. West Texas Intermediate crude futures rose 98 cents, or 1.5%, to $63.60 a barrel.
Prices had settled 0.6% higher in the previous trading session after Israel said it had attacked Hamas leadership in Doha. Both benchmarks rose nearly 2% shortly after the attack, but then retraced much of their gains.
Geopolitical tensions also rose when Poland shot down drones during a widespread Russian attack in western Ukraine on Wednesday, marking the first time a NATO member fired shots in the war. However, there was no immediate threat of oil supply disruption.
“The dark cloud of surplus ahead is … hanging over the market with Brent trading two dollars lower than last Tuesday. Geopolitical risk premiums in oil rarely last long unless actual supply disruption kicks in,” SEB analysts said.
U.S. President Donald Trump has urged the European Union to impose 100% tariffs on China and India – major buyers of Russian oil – as a strategy to pressure Moscow to enter peace talks with Ukraine, according to sources.
With European Union officials in Washington to discuss Russia, European Commission chief Ursula von der Leyen said on Wednesday the bloc was considering a faster phase-out of Russian fossil fuels as part of new sanctions against Moscow.
Traders expect the Federal Reserve will cut interest rates at its September 16-17 meeting, which would boost economic activity and demand for oil.
But the supply outlook remains bearish.
U.S. crude stocks, gasoline and distillate inventories all rose last week, the Energy Information Administration said on Wednesday.
Crude inventories rose by 3.9 million barrels in the week to Sept 5, the EIA said, compared with analysts’ expectations in a Reuters poll for a draw of 1 million barrels.
U.S. gasoline stocks rose by 1.5 million barrels, compared with analysts’ estimates for a 0.2 million-barrel draw. Distillate stockpiles, which include diesel and heating oil, rose by 4.7 million barrels, versus expectations for a 35,000-barrel rise.
“A very bearish report, the big headline is that crude build… and then on top of that we had big drop in gasoline, so now we are waiting to see how much gasoline demand will fall off a cliff after the U.S. summer driving season, and it looks like it will be substantial,” said John Kilduff, partner with Again Capital.
“Given the economic data points lately showing an indicated slowdown, especially in the labor market, this weak gasoline demand and pattern of low exports could be other indicators of a slowing economy in the U.S. and potential globally,” Kilduff added.
The EIA cautioned on Tuesday that global crude prices will be under significant pressure in the coming months because of rising inventories as OPEC+ increases output.
(Reporting by Shadia Nasralla, additional reporting by Colleen Howe in Beijing; Editing by Sonali Paul, Kirsten Donovan and Nia Williams)
