Oil Climbs as Gaza Hospital Blast Cancels Jordan Summit

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced more than 2% Wednesday after a deadly explosion at a hospital in Gaza City prompted the cancellation of a regional summit between U.S. President Joe Biden and heads of the Arab states aimed at finding a diplomatic solution to the ongoing crisis in the Middle East.

Protests across the Middle East spread into Iraq, Lebanon, and Egypt after an explosion in which Palestinian officials say at least 500 civilians were killed struck a hospital in Gaza City. Both Israel and Hamas blame each other for the attack. Leaders of Jordan, Egypt and the Palestinian Authority have since canceled a scheduled summit with Biden, complicating efforts at finding a diplomatic solution to the current crisis.

Iran, meanwhile, further stepped up its rhetoric against Israel and called for a total oil embargo by Arab states on Israel. Explosive conflicts like these can take a sudden turn in any direction, jeopardizing crude flows from the region that account for about one-third of global supplies, although so far there's been no impact on physical flows. The situation remains fluid.

Further spurring gains for the oil complex, the American Petroleum Institute reported late Tuesday commercial crude oil inventories in the U.S. declined by 4.383 million barrels (bbl) last week, missing calls for a 400,000-bbl increase. Stocks at the Cushing, Oklahoma, tank farm, the New York Mercantile Exchange delivery point for West Texas Intermediate futures, also fell 1.005 million bbl.

Gasoline inventory was drawn down 1.578 million bbl in the reviewed week, more than twice the expected decrease of 600,000 bbl. The report further showed distillate stocks declined by 612,000 bbl, below calls for a drop of 1.2 million bbl.

U.S. Energy Information Administration will release its official inventory report 10:30 a.m. EDT. Oil traders will be laser-focused on Wednesday's inventory figures for signs of any improvement in fuel consumption as the economy transitions into the final months of the year.

In broader markets, the U.S. dollar added to gains early Wednesday to trade near 106.115 after September retail sales climbed 0.7% after an upwardly revised 0.8% gain in August showed data released Tuesday morning from the U.S. Census Bureau. Economists projected a modest gain of 0.3% in the reviewed month, expecting persistent inflation and high interest rates to have throttled consumer spending. The fresh data, however, suggest consumption patterns by American households remained strong heading into the fourth quarter despite a slowdown in some pockets of the economy.

Strong consumer spending should support gasoline consumption, with driving demand having a close correlation with the labor market and overall strength of the economy. But recent demand data from the U.S. Energy Information Administration might suggest otherwise, with gasoline consumption hovering around 2008-2009 recessionary year levels.

Near 7:45 a.m. EDT, NYMEX West Texas Intermediate futures for November delivery jumped $1.97 to $88.63 bbl, while Brent on ICE gained $1.96 to $91.86 bbl. NYMEX November ULSD futures slipped to $3.1741 gallon, while front-month RBOB futures rallied $0.0310 to $2.3155 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges