Oil prices saw an uptick in early Asian trading hours on Friday, positioning for a third consecutive weekly rise as supply concerns fueled by escalating geopolitical tensions and weather-related disruptions overshadowed signs of weak demand.
Brent crude futures for August settlement, expiring on Friday, climbed 15 cents, or 0.2%, to $86.54 a barrel by 0020 GMT. The Brent contract for September also increased by 0.2%, reaching $85.44 a barrel. Concurrently, U.S. West Texas Intermediate (WTI) crude futures for August delivery rose 24 cents, or 0.3%, to $81.98 a barrel.
Despite indications of weak demand in the United States, the world’s largest oil consumer, oil prices have surged due to escalating tensions between Israel and Lebanon’s Hezbollah. The potential for a broader conflict in the Middle East, potentially involving key oil exporter Iran, has heightened supply concerns. On Thursday, the French foreign ministry voiced its worries about the situation in Lebanon, while Turkey reaffirmed its solidarity with Lebanon and called for regional support.
Adding to supply pressures, weather-related disruptions have also played a significant role. Heavy rains in Ecuador have resulted in a decline of 100,000 barrels per day in production over the past week, according to FGE Energy. In the U.S., the Gulf Coast, a critical hub for the nation’s energy and export infrastructure, faces potential disruptions as the U.S. National Hurricane Center tracks a weather system that could develop into a cyclone and impact the region.
Both Brent and WTI futures have risen by 1.5% on a weekly basis, indicating sustained upward momentum.
On the demand side, rising U.S. crude stockpiles and weak gasoline consumption have tempered oil price gains. Government data this week revealed an unexpected increase in crude inventories, reflecting weakened fuel demand. However, expectations of record travel over the July 4th weekend in the U.S. could bolster gasoline demand and help reduce stockpiles, offering a potential boost to prices.
As the geopolitical and weather-related risks continue to unfold, the oil market remains on edge, balancing the delicate interplay between supply constraints and demand fluctuations.