Oil trades near two-month high on signs of falling U.S. inventories

(Bloomberg) — Oil surged to near a two-month high on signs that U.S. crude inventories were drawing down significantly.

Bloomberg's most read articles

Brent crude was trading above $86 a barrel after slipping 0.4% on Tuesday, with West Texas Intermediate nearing $83. The American Petroleum Institute reported that crude inventories fell by 9.2 million barrels last week, according to people familiar with the data. If confirmed in official figures later Wednesday, it would be the biggest drop in barrel terms since January.

Crude oil remains solidly higher this year, with futures benefiting from a general risk-on sentiment in equity markets as the U.S. benchmark S&P 500 hits record after record. Concerns over a potentially active hurricane season have also been supportive. Options markets are reflecting this bullish trend, with calls once again trading at a rare discount to opposing puts.

Geopolitical risks are also significant, with investors watching elections in France and the UK. In the Middle East, the escalating war between Israel and Hezbollah threatens to escalate into open warfare, while the Israeli Defense Forces have warned Palestinians to leave parts of Khan Younis in Gaza ahead of a possible new attack.

“The main risk to oil markets is that a war between Israel and Hezbollah could escalate into a broader conflict,” said Vivek Dhar, an analyst at the Commonwealth Bank of Australia. “In particular, Iran’s more direct involvement in a war between Israel and Hezbollah could jeopardize Iran’s oil supplies and associated infrastructure.”

To receive Bloomberg's Energy Daily newsletter in your inbox, click here.

Bloomberg Businessweek's Most Read Articles

©2024 Bloomberg LP