Oil climbed to the highest level since early March on Wednesday after an explosion at Lebanon’s main port rocked the capital Beirut, stoking fears over instability in the region.
“Tensions are high and that just kind of puts a fine point on it,” said John Kilduff, a partner at Again Capital LLC. “Looks like there’s going to be a draw in crude oil again, so we got that support as well.”
Lebanon is reeling under its worst financial and economic crisis, with a sharp plunge in its local currency eroding purchasing power and throwing many into poverty and unemployment.
Analysts attributed the price rise mainly on a drop in US crude inventories and the weak dollar, but mounting coronavirus infections also weighed on the demand outlook.
For more coronavirus news, visit our dedicated page.
“We’re starting to see a trend emerge of diminishing crude oil stocks in the United States,” said Tom Finlon of GF International. “What this may mean is that OPEC+ has an emerging capability to perhaps accurately regulate the production of crude and link it to demand.”
Brent crude was up $1.50, or 3.4 percent, at $45.93 a barrel by 1345 GMT, while West Texas Intermediate oil rose $1.51, or 3.6 percent, to $43.21 a barrel.
Both contracts gained over 4 percent earlier in the session.
US crude inventories fell by 8.6 million barrels in the week to August 1 to 520 million barrels, compared with analysts’ expectations for a 3 million barrel drop, the American Petroleum Institute found.
Official figures are due on Wednesday.
A weaker dollar, which makes oil cheaper for holders of foreign currencies, also supported prices.
“There’s no escaping the benefits of a weaker dollar in the commodity space and oil is certainly basking in its decline,” senior OANDA analyst Craig Erlam said.
Sentiment also drew support from signs that talks between Democrats in Congress and the White House on a new coronavirus relief package are making progress, although the sides remain far apart.
US factory data this week also showed an improvement in orders, which some analysts took as a hint of economic recovery.
Euro zone business activity returned to modest growth in July as some curbs imposed to stop the spread of the coronavirus eased, the Composite Purchasing Managers’ Index from IHS Markit showed on Wednesday.
Rising prices come against the backdrop of a surge in coronavirus cases which could threaten a recovery in fuel demand.
Global coronavirus deaths surpassed 700,000 on Wednesday, according to a Reuters tally, with the United States, Brazil, India and Mexico leading the rise in fatalities.
For all the latest headlines follow our Google News channel online or via the app
“We see gasoline demand coming in close to 7 percent year-on-year lower through Q3, with gasoil/diesel registering a decline of some 4 percent, implying a continued slowdown of the recovery, with a global return to 2019 levels this year increasingly in doubt,” JBC Energy said.
The consultancy sees jet fuel demand down 50 percent year on year lower through the third quarter.
Beirut blast: The 'horror' is indescribable, says Lebanon's President AounNo words can describe the horror caused by the blast that killed more than 100 people and wounded thousands of others in Lebanon's capital Beirut, ... Middle East
France opens probe into Beirut port blast after 21 citizens wounded, say prosecutorsProsecutors in France opened an investigation Wednesday after 21 French citizens were wounded in the devastating blast at the port in the Lebanese ... Middle East
As coronavirus hits global economy, foreign investment in Dubai plunges 74 pctForeign direct investment in Dubai fell by 74 percent in the first half of the year compared with the same period of 2019, as the coronavirus pandemic ... Coronavirus
Global coronavirus deaths exceed 700,000, one person dies every 15 seconds on averageThe global death toll from COVID-19 surpassed 700,000 on Wednesday, according to a Reuters tally, with the United States, Brazil, India, and Mexico ... Coronavirus
Russia slightly raises oil output ahead of planned OPEC+ taperingRussia slightly increased its oil production in July, ahead of OPEC+ plans to start easing their record supply cuts starting this month.The nation’s ... Energy
Oil prices slip on US-China tensions, rising virus cases hit demand recoveryOil prices edged lower on Monday, as rising coronavirus cases and tensions between the United States and China clouded the outlook for oil demand ... Coronavirus