Oil prices held steady in Asian markets on Thursday following strong gains earlier in the week, driven by escalating geopolitical tensions in Russia and the Middle East, which raised concerns over potential supply disruptions.
Despite the rally, traders remained cautious due to fears of oversupply. U.S. data showing an unexpected build of 3.93 million barrels in crude inventories added to concerns. By 21:33 ET (01:33 GMT), Brent crude for November was trading at $67.49 per barrel, while West Texas Intermediate edged down to $64.34 per barrel. A softer U.S. dollar, following weaker-than-expected producer price index inflation, provided some support, with attention now turning to the upcoming U.S. consumer price index data.
Geopolitical Tensions Boost Prices
Rising supply concerns in Russia and the Middle East helped sustain oil prices earlier in the week. In Europe, Poland shot down Russian drones over its airspace during an attack in Western Ukraine, marking the first NATO engagement in the long-running conflict. Although the move raised fears of escalation, Moscow stated the incident was unintentional and expressed readiness to discuss the matter with Poland.
In the Middle East, Israel carried out airstrikes on Hamas targets in Doha, Qatar, a U.S. ally, potentially affecting ongoing peace negotiations. These strikes suggested continued hostilities in Gaza, initially lifting oil prices by 2% before trimming gains. Expectations of tighter U.S. sanctions on Russian oil, combined with President Trump’s calls for trade tariffs against India and China, also provided upward pressure.
OPEC+ contributed to the tightening market narrative, announcing a smaller-than-expected production increase for October, signaling a potentially tighter supply situation than traders had anticipated.
Oversupply Concerns Limit Further Gains
Still, worries about a looming global supply glut capped additional gains. Russia and China continue expanding energy trade, while India shows no sign of reducing purchases of Russian crude. In the U.S., demand softened following the peak summer travel season, with gasoline and distillate inventories rising sharply.
Robust U.S. production has added further pressure on global supply, reinforcing caution among traders and contributing to a more balanced outlook for oil markets despite geopolitical risks.
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