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U.S. crude oil futures jumped more than 4% on Wednesday, after top Hamas political leader Ismail Haniyeh was assassinated in Tehran, just hours after Israel struck a senior Hezbollah military leader in Beirut, ratcheting up fears of a potential direct conflict between Israel and Iran.
Iran’s Revolutionary Guard accused Israel of the assassination, and supreme leader Ayatollah Ali Khamenei said it is the country’s duty to punish Israel in retaliation.
The killing also adds to uncertainty over a potential Gaza ceasefire deal between Israel and Hamas, since Haniyeh was a senior negotiator in the talks.
Lending additional support for oil prices, U.S. crude stockpiles posted their fifth straight weekly decline, marking the longest string of crude drawdowns since a seven-week streak between November 2021 and January 2022.
Commercial crude stocks excluding the Strategic Petroleum Reserve fell 3.4M barrels – much more than expected – to 433M barrels in the week ended July 26, 4% below the five-year average for the time of year, the U.S. Energy Information Agency reported.
Gasoline inventories posted a back-to-back weekly decline, falling by a larger than expected 3.7M barrels to 223.8M barrels, which was 3% below the five-year average, the EIA said.
“Robust exports have helped to offset lower refining activity and strong imports to encourage a fifth consecutive draw to crude inventories,” Kpler oil analyst Matt Smith said, calling the report “modestly supportive” for oil prices but added that geopolitical risk was “the key driver” of Wednesday’s rally.
Late in the session, the Fed hinted it could be moving closer to a first interest rate cut in September, which would be seen supporting U.S. growth and consumption.
Front-month Nymex crude (CL1:COM) for September delivery surged +4.2% to $77.91/bbl, and front-month September Brent crude (CO1:COM) closed +2.6% to $80.72/bbl, with both benchmarks snapping three-day losing streaks.
Front-month September Nymex natural gas (NG1:COM) settled -4.2% to $2.036/MMBtu, surrendering the previous day’s gains.
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Crude still tallied losses for the full month, with WTI and Brent falling 4.4% and 6.6%, respectively, driven by a “deteriorating picture for domestic demand in China,” where crude imports finished July at their “slowest monthly pace in a year and a half,” Smith said.
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