By Arathy Somasekhar and Trixie Yap
(Reuters) -Oil prices climbed by more than 1% on Thursday, almost reversing previous session’s losses, as Middle East tensions came back into focus ahead of the U.S. election despite a mixed bag of U.S. fuel inventories.
futures rose 95 cents, or 1.27% to $75.91 at 0302 GMT, while U.S. West Texas Intermediate crude futures climbed $1, or 1.41%, to $71.77 as an exchange of heavy fire between Israel and Hezbollah continued to worry markets about supply.
Oil prices have gained nearly 4% so far this week, helping trim last week’s losses of than 7% on worries about Chinese demand and easing concerns about potential disruptions caused by fighting in the Middle East.
“The bumpy play in oil prices is a mix of technical reaction to uncertainty ahead,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova.
“Amid lack for supporting catalyst and with sore sentiments all over oil markets, oil bulls jumping at any additional headline of escalating conflict in Middle East, looks well justified,” she added.
Israel launched strikes on Syrian capital Damascus early on Thursday, Syrian state media said, the latest such attack amid the war in Gaza.
This followed earlier Israeli strikes on Beirut’s southern suburbs on Wednesday and after Hezbollah said it fired precision guided missiles for the first time at Israeli targets.
The intensifying exchanges of fire come as Washington makes a final major push for peace between Israel and Iran-backed groups Hezbollah and Hamas before the Nov. 5 U.S. presidential election that could alter U.S. policy in the Middle East.
The current volatility ahead of a critical week of U.S. Election followed with Fed’s policy decision is ensuring enough traction to cause wilder fluctuations, even though supplies remain ample, said Phillip Nova’s Sachdeva.
Meanwhile, inventories rose by 5.5 million barrels last week, according to the U.S. Energy Information Administration on Wednesday, compared with analysts’ expectations in a Reuters poll for a 270,000-barrel rise.
Despite the stockpile accumulation, implied demand still rose, said ANZ analysts in a client note. [EIA/S]
Also on the oil demand front, support came from stronger demand for distillates, according to JP Morgan analysts in a client note, highlighting strong travel demand in Asia and consistent drawdowns in distillate stocks in several major markets.