DTN Oil Update
Oil Futures Extend Gains on Geopolitical Turmoil
VIENNA (DTN) -- Oil prices rose for a third consecutive trading day Wednesday morning, after an Israeli strike on the political arm of Hamas in Qatar, Polish air defense downing drones for the first time and threats of new sanctions on Russia all raised the geopolitical risk premium. A surprising decline in U.S. producer prices last month added to bullish sentiment, but gains were kept in check by bearish fundamentals and an industry report showing across-the-board builds in U.S. oil inventories.
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NYMEX-traded WTI for October delivery rose $0.66 to trade near $63.29 bbl, and ICE Brent for November delivery gained $0.67 to $67.06 bbl.
October RBOB gasoline futures added $0.0144 to $2.0069 gal, and the front-month ULSD contract was up $0.0046 to $2.3245 gal.
The U.S. dollar index softened by 0.127 points to 97.625.
Tuesday's attack on a Hamas delegation in the capital city of U.S. ally Qatar sparked fears of escalation in the region and further decreased chances of a peaceful resolution to the ongoing conflict. At the same time, Ukraine stepped up its attacks on Russian energy infrastructure, striking multiple crude oil and natural gas pipelines over the last 48 hours. On Wednesday, Poland shot down drones in its airspace, marking the first military action by a NATO member state since Russia's invasion of Ukraine. It was not immediately clear if the drones were of Russian or Ukrainian origin. U.S. President Trump, meanwhile, reportedly asked EU officials to impose tariffs of up to 100% on China and India to dissuade them from purchasing Russian oil, according to the Financial Times. EU members are in the process of discussing and finalizing the 19th sanctions package on Russia.
The Bureau of Labor Statistics on Wednesday reported producer prices unexpectedly declined last month, potentially raising the odds of Federal Reserve interest rate cuts, which in turn would help boost demand. The Producer Price Index fell 0.1% month-on-month in August, compared with analyst expectations of a 0.3% increase.
The American Petroleum Institute on Tuesday reported builds to domestic crude oil, gasoline and distillate fuel oil inventories, with U.S. commercial crude oil stocks expanding by 1.25 million bbls last week. Official government oil inventory data from the U.S. Energy Information Administration is scheduled for 10:30 a.m. EDT release today.
