Investing.com — Oil prices edged higher Wednesday, with elevated tensions in the Middle East providing support after U.S. inventories rose more than expected.
By 08:45 ET (12.45 GMT), the futures traded 0.2% higher at $80.90 a barrel and the contract climbed 0.3% to $85.55 a barrel.
Middle East tensions on the rise
Both crude contracts gained around 1% on Tuesday, after Israeli Foreign Minister Israel Katz warned of a possible “all out war” with Lebanon’s Hezbollah, just as the country’s conflict with Hamas in Gaza appeared to be settling down.
The U.S., Israel’s main backer, is attempting to avoid a broader conflict between Israel and the Iran-backed group, as an escalating war risks supply disruption in this key oil-producing region.
Additionally, reports suggested a Ukrainian drone strike led to an oil terminal fire at a major Russian port, potentially impacting the supply of crude from this major supplier.
US crude inventories rise
This enhanced tension has overshadowed data showing an increase in domestic crude stocks just as many were expecting a pick up in demand in the summer driving season to result in falling inventories.
U.S. fell by around 2.3 million barrels for the week ended June 14, according to data from the American Petroleum Institute, compared with a draw of 2.4 million barrels the previous week.
“The surprise crude build means the report was moderately bearish,” said analysts at ING, in a note.
UBS looks for crude rebound
UBS expects Brent to rebound to the mid to high-$80s, supported by the OPEC+ cuts extension and the seasonal rebound in demand.
The Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, announced plans earlier this month to gradually phase out its voluntary cuts potentially as early as October 2024.
Brent is then set to move to $80/bbl next year, UBS added, as OPEC+ starts to bring back production gradually from the second quarter.
“We do expect a negative impact on oil demand from slower GDP growth and higher prices but continue to expect demand to grow until the late 2020s,” UBS said.