Oil prices climbed in Asian trade on Wednesday to recover from the previous session’s decline as the risk premium for crude increased following Israel’s latest attack on Lebanon’s capital, Beirut, aimed at the Hezbollah militant group.
September contract Brent crude oil futures added 1.32% to $79.67 per barrel, while the US West Texas Intermediate (WTI) crude futures expiring in the same month advanced 1.61% to $75.93 per barrel.
The two benchmarks fell 1% on Tuesday to $78.63 and $74.73 per barrel, respectively, their lowest since June 5, due to concerns over a slow demand outlook for top importer China, while the Organization of Petroleum Countries (OPEC) is expected to proceed with supply hikes at its meeting on Thursday.
Prices also bounced back from near two-month lows after data from the American Petroleum Institute (API) showed that US inventories lost almost 4.5 million barrels in the week ending July 26, reaching the fifth consecutive week of solid draws, as the travel-heavy summer season kept demand strong.
Still, oil’s rebound remained uncertain amid doubts over China’s oil demand. Markets are also wary ahead of the Federal Reserve’s monetary policy meeting later in the day.
Israel’s Beirut Attack Raises MidEast All-Out War Concerns
Geopolitical tensions in the Middle East intensified on Tuesday after Israel launched rare, targeted air strikes on a southern suburb of Beirut in retaliation for the weekend attack in Israeli-controlled Golan Heights, which Hezbollah has been accused of orchestrating.
Israel claimed that they were able to kill senior Hezbollah commander Fuad Shukr, who was the intended target and allegedly the one responsible for Saturday’s rocket strike on Golan Heights. The Iran-backed military group has denied leading the attack.
It has yet to be confirmed whether Shukr died in the attack, which so far resulted in three casualties and dozens of people injured. The US has also held Shukr accountable for the fatal 1983 Marine bombing in the Lebanese capital.
The incident prompted traders to price in a slightly larger risk premium to oil prices amid the uncertainty of a broader war occurring in the Middle East. Conflict between Israel and Iran had mostly eased as well, despite the two parties still being at war.
An Israel-Hamas truce also appears unlikely to be established soon, with the Palestinian militant group alleging in recent talks that Israeli Prime Minister Benjamin Netanyahu introduced new conditions to a ceasefire proposal backed by the US.
Netanyahu has denied demanding revisions and said Hamas requested several alterations to the proposed deal.
