Oil prices up after Israeli attacks, but oversupply caps gains

LONDON: Oil prices rose on Wednesday after Israel attacked Hamas leadership in Qatar, Poland shot down drones and the US made a push for new sanctions on buyers of Russian oil, but concerns over crude oversupply capped further gains.

Brent crude futures were up 56 cents, or 0.8%, at $66.95 a barrel, as of 0835 GMT, and US West Texas Intermediate crude futures gained 56 cents, or 0.9%, to $63.19 a barrel.

Prices had settled up 0.6% in the previous trading session after Israel said it had attacked Hamas leadership in Doha.

Both benchmarks rose nearly 2% shortly after the attack, but then retraced much of their gains.

Elsewhere, geopolitical tensions also rose when Poland shot down drones during a widespread Russian attack in western Ukraine on Wednesday, marking the first time a NATO member fired shots in the war.

However, there was no immediate threat of a supply disruption.

“The dark cloud of surplus ahead is hanging over the market with Brent trading two dollar lower than last Tuesday. Geopolitical risk premiums in oil rarely last long unless actual supply disruption kicks in,” SEB analysts said.

Meanwhile, US President Donald Trump has urged the European Union to impose 100% tariffs on China and India as a strategy to pressure Russian President Vladimir Putin, according to sources.

China and India are major buyers of Russian oil, which has helped to support Russia’s coffers since it launched its invasion of Ukraine in 2022.

“Uncertainty remains over how far the administration will go, as aggressive action could conflict with efforts to manage inflation and influence the Federal Reserve to reduce interest rates,” LSEG analysts said.

Traders expect the Federal Reserve to cut interest rates at its September 16-17 meeting, which would boost economic activity and demand for oil.

But the supply outlook remains bearish.

The US Energy Information Administration cautioned global crude prices will be under significant pressure in the coming months because of rising inventories as OPEC+ increases output.

US crude, gasoline and distillate stocks rose last week, market sources said, citing American Petroleum Institute figures on Tuesday. Government data is due at 1430 GMT.