WASHINGTON (dpa-AFX) - Crude oil surged on Wednesday as investors digested geopolitical tensions in the Middle East and Europe along with inflation data from the US that has reinforced interest rate cut expectations.
WTI Crude Oil for October delivery was last seen trading up by $1.07 (or 1.71%) at $63.70 per barrel.
Yesterday, in what Israel has labelled as 'Summit of Fire' operation, the Israeli Defence Forces conducted an air strike in Doha. After these attacks, new tensions are brewing in the Middle East.
While Israel announced that the US was informed well in advance of the attacks, the strikes have brought the Middle East leaders to a single platform, seemingly against Israel.
The President of the UAE, Sheikh Mohamed bin Zayed Al Nahyan touched down in Doha today. Jordan's Crown Prince Hussein is set to visit on Wednesday, while Saudi Arabia's Crown Prince Mohammed bin Salman is expected to arrive on Thursday.
On the inventory front, API reported that US crude oil inventories jumped by 1.25 million barrels for the week ending September 5.
The US EIA reported that crude oil inventories climbed by 3.9 million barrels last week; gasoline inventories increased by 1.5 million barrels; and distillate fuel inventories (which include heating oil and diesel) jumped by 4.7 million barrels.
The Financial Times reported that unable to broker a truce between Russia and Ukraine, US President Donald Trump has called for the EU nations to slap tariffs up to 100% on India and China, major importers of Russian oil.
Currently, India has been hit by the US with a total 50% tariffs, while Chinese exports to the US attract a duty of 30%.
Oil exports have been a key source of revenue for Russia, and Trump intends to cut off the monetary benefit and thereby increase pressure on Russia to agree to a ceasefire.
Meanwhile, as several Russian drones violated Poland's airspace, Polish forces with NATO support shot down several last night. The attacks and counterattacks have heightened the already existing tensions to a new level.
Both the new developments in conflicts in Middle East and Europe helped crude oil prices on the upside.
In a virtual meeting on Sunday, the OPEC+ cartel agreed to boost output by 137,000 barrels per day next month. Though the size is less than what markets anticipated, with peak demand reaching a close, the decision has added to oversupply concerns.
Today, data from Labor Department revealed that producer inflation in the United States - as measured by the change in the Producer Price Index (PPI) - slowed to 2.6% on a yearly basis in August.
On a monthly basis, the PPI declined by 0.1% following a 0.7% increase noted in July.
In addition, the core PPI (excluding food and energy) declined by 0.1% on a MoM basis, while it increased 2.8% on a YoY basis.
These figures have bolstered the expectations of a US Fed rate cut at its upcoming September meeting.
Traders feel that being a dollar-denominated commodity, further clarity on oil prices would come to the fore after the Fed's call on interest rates next week as it could impact the US dollar.
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