Oil Prices Surge 2% Amid Concerns Over Supply Disruption and Middle East Tensions

In a surprising turn of events, oil prices saw a 2% surge on Wednesday, propelled by concerns surrounding supply disruptions and escalating tensions in the Middle East. This hike was driven by a substantial drawdown in U.S. crude stocks, which exceeded expectations, leaving the energy market in a state of anticipation.

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In a surprising turn of events, oil prices saw a 2% surge on Wednesday, propelled by concerns surrounding supply disruptions and escalating tensions in the Middle East. This hike was driven by a substantial drawdown in U.S. crude stocks, which exceeded expectations, leaving the energy market in a state of anticipation.

Brent crude futures experienced a remarkable gain of $1.62, marking a 1.8% increase, bringing the price per barrel to $91.49 as of 0148 hours. Simultaneously, markets were on edge as they awaited the release of China's GDP figures. West Texas Intermediate crude (WTI) futures weren't left behind, with an increase of $1.77, equating to a 2% rise, and settling at $88.43 per barrel.

The surprise came as U.S. crude stocks fell by approximately 4.4 million barrels during the week ending on October 13, a stark contrast to the anticipated 300,000-barrel draw projected by analysts. These figures were sourced from the American Petroleum Institute, which released the data on Tuesday, while official U.S. government data was scheduled for release later that same day.

However, the situation in the Middle East has further added to the tension. An unfortunate incident unfolded as about 500 Palestinians lost their lives in a devastating explosion at a Gaza City hospital on Tuesday. Both Israeli and Palestinian officials pointed fingers at each other, deepening the Israel-Hamas conflict.

U.S. President Joe Biden has expressed his support for Israel in its war against the Palestinian Islamic Jihad militant group, Hamas. The White House stated that President Biden's visit aims to prevent an escalation of the conflict.

Shifting the focus to the global economy, there were concerns about China's economic slowdown in the third quarter due to persistently weak demand. Nevertheless, there were expectations that increased stimulus measures might help Beijing reach its full-year growth target.

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On a different note, U.S. retail sales surpassed expectations in September, igniting speculations of another interest rate hike by the Federal Reserve by the end of the year. Such rate hikes are seen as tools to curb inflation but may have consequences like slowing economic growth and reducing oil demand.

Lastly, a significant political development emerged as Venezuela's government and its political opposition reached an agreement on electoral guarantees for the 2024 presidential elections. This agreement paves the way for potential relief from U.S. sanctions, which, in turn, could enhance oil supplies. The U.S. has imposed sanctions on Venezuelan oil exports since 2019, and while relief is expected to bolster the oil supply, analysts believe it will take time due to a lack of investment in the sector.