Oil Prices Volatile Amid Inventory Build, Strong Dollar, and Middle East Tensions

Key Takeaways:

• Oil prices rose marginally after a drop, driven by concerns over U.S. crude stockpiles.
• Brent crude price grew by 0.59% and WTI by 0.64%, showing a slight market recovery.
• U.S. crude inventories saw a significant rise of 5.5 million barrels, outpacing forecasts.
• Volatility continues due to ongoing Middle Eastern conflicts.

Petroleum Price: Oil Prices Recover Amid Inventory Surge

• Oil prices edged higher on Thursday, recouping some of the more than 1% losses from the previous session after U.S. crude inventories rose much more than estimated.
• Brent crude futures rose 44 cents, or 0.59% to $75.40 at 0003 GMT, while U.S. West Texas Intermediate crude futures climbed 45 cents, or 0.64%, to $71.22 as an exchange of heavy fire between Israel and Hezbollah continued to worry markets about supply.
• Brent was on track for a 3.2% gain in the week, while WTI was set to rise 2.9%. Last week oil fell more than 7% on worries about Chinese demand and easing concerns about potential disruptions of Middle East oil supplies. MCX Crude oil prices opened at 6044 with a gain of 1.14%.

Petroleum Demand and Supply Disruptions and Dollar Impact

• The rise in stockpiles came as refinery activity recovered, but it was partly attributed to a rebound in crude imports following disruptions caused by Hurricane Milton. Refinery runs also increased as seasonal maintenance ended, leading to a build-up in gasoline supplies, although distillates saw a minor drop.
• Despite the dip in oil prices, the market remained on edge due to ongoing geopolitical tensions in the Middle East.
• Concerns over potential oil supply disruptions continued, particularly as Israel launched strikes on the Lebanese city of Tyre, adding to fears of prolonged conflict in the region. These tensions have led traders to remain cautious, despite US efforts to broker a ceasefire.
• Adding pressure on oil, the US dollar index hit its highest level since July, making oil more expensive for buyers using other currencies, thereby affecting demand.
• As oil markets remain volatile, analysts suggest that any further developments in the Middle East could trigger significant price movements.

Petroleum News

• As Permian producers exhaust prime tier-one acreage amid a surge in output in the basin, second-tier drilling locations tend to yield crude of different specifications, often lighter than the typical WTI Midland qualities.
• Light crude from the U.S. has been winning over customers globally with its low sulfur content and refining qualities similar to other light grades from the North Sea and Africa.
• Recent testing has found that the gravity of WTI Midland is between 41 and 44 degrees, anonymous sources with knowledge of confidential data have told Reuters.
• Refiners may need to blend super light crude with heavier grades to process it into the key fuels gasoline, diesel, and jet fuel. Or they may have to invest, a lot, into refinery upgrades and convert crude units to process super light crudes.

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Expert Opinion: Middle East Tensions Keep Prices Uncertain

• The build in U.S. crude inventories (5.5 million barrels) exceeded forecasts, suggesting short-term downward pressure on oil prices. However, analysts suggest this may only be a temporary effect, as imports rebounded following Hurricane Milton's disruptions.
• Supply risks from the Middle East remain a concern, with the market waiting for Israel's response to Iran's missile attack. The ongoing uncertainty may keep prices volatile. The lack of progress in ceasefire negotiations between Israel and militant groups could prolong market uncertainty, supporting oil prices in the medium term if supply disruptions escalate.