Geopolitical risks, lower inventory concerns boost crude oil prices
Houston
Oil prices rose on Thursday despite what appears to be a breakthrough in global trade tensions, as analysts pointed to falling inventory levels and the return of geopolitical risks in the Middle East as key factors supporting the market.
Brent crude futures climbed by 17 cents, or around 0.3 percent, to reach $68.69 per barrel as of 10:50 GMT. Meanwhile, US West Texas Intermediate (WTI) crude futures rose by 35 cents, or 0.5 percent, to $66.73 per barrel.
US President Donald Trump stated that notification letters regarding US tariff rates for smaller nations would be sent soon. He also hinted at the possibility of reaching an agreement with China on illegal narcotics, as well as a potential deal with theEuropean Union.
Ashley Kelty, analyst at Panmure Liberum, said: 'Prices are expected to remain volatile in the near term due to uncertainty over the final scope of US tariffs and their impact on global economic growth,' adding that prices could stabilise at lower levels in themedium term.
John Evans, analyst at PVM Oil Associates, said that Thursday's oil market also responded to a tightening inventoryscenario.
The International Energy Agency stated last week that recent increases in oil production have not translated into higher inventory levels, suggesting that markets remain thirsty for additional crude.
Evans noted: 'Oil market focus had recently shifted away from the Middle East, but the reminder of Israel's strikes in Syria, along with drone attacks on oil infrastructure in Iraqi Kurdistan, came at a fitting time to reintroduce some tension and energy into the scene.'
According to two energy officials on Wednesday, drone strikes on oil fields in Iraq's semi-autonomous Kurdistan region reduced crude output by up to 150,000 barrels per day, due to infrastructure damage that forced production to halt at multiple sites.
Giovanni Staunovo, commodity analyst at UBS, said: 'So far, market indicators suggest that the physical oil market remains undersupplied,' while also warning that continued trade tensions could weigh on the outlook for oil demand growth, posing downside risks to prices.
The US dollar recovered during Thursday's trading after President Donald Trump dismissed fresh rumors of his intent to fire Federal Reserve Chair Jerome Powell. Meanwhile, a strong earnings season helped end a four-day losing streak for European stock markets.
The pan-European Stoxx 600 index opened notably higher, supported by record order volumes announced by Swiss engineering giant ABB, and a record profit of $13.5 billion reported by Taiwanese chipmaker TSMC. Investor sentiment was also buoyed by renewed optimism over a potential trade agreement between the EU and the US following talks in Washington.
Markets were also awaiting key US data on retail sales and jobless claims for further insight into how tariffs are impacting the economy, alongside the European Commission's proposal for a significant increase in the EU budget.
Currency markets remained the primary focus. The US dollar rose 0.4 percent to $1.16 per euro, rebounding to levels seen before what Société Générale analyst Kit Juckes called 'Wednesday's madness,' when reports that Trump was preparing to fire Powell sent markets into a brief panic—before Trump later denied the claim.
In Japan, the dollar found additional support as polls showed that Prime Minister Shigeru Ishiba's coalition risked losing its Senate majority in upcoming elections. This political uncertainty pushed the yen to its weakest level since April, trading at 148.73 per dollar.
Data also showed that Japanese exports are beginning to suffer from tariffs, with shipments declining for a second straight month. Meanwhile, the Australian dollar dropped 1 percent overnight following weak employment data.
Juckes noted: 'The market is heavily exposed against the dollar, and now that we're deep into summer, some investors have begun buying the greenback again.'
US equity futures pointed to a slightly higher open on Wall Street later in the day. In Europe, stocks rose 0.7 percent, snapping a four-day losing streak, while Asian markets saw gains between 0.3 percent and 0.6 percent, including the Nikkei, Taiwan Weighted and China's CSI.
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