DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced on Wednesday, although both benchmarks moved off overnight highs after U.S. President Joe Biden affirmed evidence backing Islamic Jihad responsibility for the hospital attack in Gaza City, while calling on all parties to the conflict for restraint.

Early evidence provided by U.S. intelligence shows no support of an Israeli airstrike on the Al-Ahli Arab Hospital, where on Tuesday an explosion killed scores of civilians seeking care and shelter, according to White House officials. Multiple White Huse officials stressed the evidence is still preliminary.

Protests broke out across the Middle East overnight and continued into Wednesday afternoon in Iraq, Lebanon, and Egypt, as Hamas and Israel exchanged blame for the deadly attack.

Oil spiked more than 3% overnight after leaders of Jordan, Egypt, and Palestinian territories cancelled a regional summit with Biden scheduled for the second leg of his trip to the Middle East, further complicating efforts to find a diplomatic solution to the ongoing violence.

Iran, meanwhile, stepped up its rhetoric against Israel and called for a total oil embargo by Arab states on Israel.

"Markets really struggle how to trade this! There are no direct supply losses, yet the whole region -- Iran, Iraq, Saudi Arabia -- are too close for comfort," said Amrita Sen, Energy Aspects Founder and Director of Research, on Bloomberg TV.

The Middle East region has a complicated web of alliances and nemesis that could trigger a sudden escalation of violence, entangling heavyweight producers like Saudi Arabia, Iran, and Iraq.

Separately, inventory report released from the U.S. Energy Information Administration at midmorning showed total oil and product supplies in the United States declined by a combined 14 million barrels (bbl) last week as demand for refined fuels improved modestly heading into the second half of the month.

Commercial oil stocks decreased by 4.5 million bbl in the reviewed week to about 5% below the five-year average 419.7 million bbl. Oil stored at the Cushing tank farm in Oklahoma, the delivery point for WTI futures, fell 758,000 bbl from the previous week to 21 million bbl.

U.S. crude oil production remained unchanged at a record weekly high 13.2 million barrels per day (bpd), topping the previous high of 13.1 million bpd set during the week ended March 13, 2020.

The refinery run rate, meanwhile, increased by a larger-than-expected 0.4% from the previous week to 86.1% of capacity compared with expectations for a 0.1% decrease. Domestic refiners processed 15.4 million bpd in the reviewed week, up 192,000 bpd from the prior week.

In the gasoline complex, commercial stockpiles fell 2.4 million bbl to 223.3 million bbl compared with analyst expectations of a 600,000 bbl increase. Demand for gasoline improved for the second consecutive week through Oct. 13, averaging 8.943 million bpd after plunging to a 25-year low 8 million bpd at the start of the month.

At settlement, NYMEX WTI futures for November delivery jumped $1.66 to $88.32 bbl, paring an advance to an intrasession high of $89.88 bbl. Brent on ICE advanced $1.60 to $91.50 bbl, fading from a $93 bbl intrasession high. NYMEX November ULSD futures fell back to $3.1393 gallon, down $0.0374, while front-month RBOB futures rallied $0.0690 to $2.3535 gallon.

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