By Adedapo Adesanya
The oil market rose by nearly 3 per cent on Wednesday as investors worried that the conflict in the Middle East could widen after the killing of a Hamas leader in Iran and after a sharp fall in crude stockpiles in the United States.
Brent crude gained $2.09 or 2.66 per cent to finish at $80.72 a barrel while the US West Texas Intermediate (WTI) crude rose by $3.18 or 4.26 per cent to settle at $77.91 a barrel.
Still, Brent finished July with nearly a 7 per cent monthly decline with WTI down nearly 4 per cent for the month.
Crude prices moved higher after the US Energy Information Administration (EIA) reported an inventory draw of 3.4 million barrels for the week to July 26.
The inventory change compared with a draw of 3.7 million barrels for the previous week, when fuel inventories also declined substantially. For the week to July 26, the EIA estimated mixed changes in fuel inventories.
Gasoline (petrol) stocks shed 3.7 million barrels with production averaging 10 million barrels daily. This compared with a stock draw of 5.6 million barrels for the previous week when gasoline production averaged 10.2 million barrels daily.
Tensions in the oil-producing Middle East region heated up overnight on news that Hamas leader Ismail Haniyeh was assassinated in Iran.
This came a day after the Israeli government claimed it killed Hezbollah’s most senior commander, Fuad Shukr, in an airstrike on Lebanon in retaliation for Saturday’s rocket attack on Israel which reportedly claimed the lives of 12 civilians, most under the age of 16.
The second of the two strikes, and the one that sent oil prices spiking, came just hours later when Hamas’ political leader was killed while in Iran for the swearing-in ceremony of the country’s new president.
The strike has heightened tensions in the region and is likely to undermine Gaza ceasefire talks, with Iran, Qatar, Jordan, and Lebanon all condemning Israel.
Also, the US conducted a strike in Iraq in the latest conflict in the region.
A fall in the US Dollar supported prices after it dropped 0.4 per cent against other benchmarked currencies.
A weaker Dollar can boost demand for oil by making the greenback-denominated commodity cheaper for holders of other currencies.
Limiting gains were concerns about fuel demand in China, the world’s top crude oil importer which was worsened by China’s manufacturing activity in July shrinking for a third month, data showed on Wednesday.
The Organisation of the Petroleum Exporting Countries and its allies, OPEC+, will hold an online joint ministerial monitoring committee meeting (JMMC) on Thursday (August 1) but the alliance is expected to stick to their current deal on production and start unwinding some output cuts from October.