(Bloomberg) — Oil edged higher for a third day as traders weighed escalating geopolitical risks against signs of increasing inventories in the US, the biggest consumer.
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Global benchmark Brent approached $74 a barrel in London, extending this week’s gain to more than 3%, amid an escalation of Russia’s war on Ukraine and rising tensions between the Kremlin and the West.
Meanwhile, the American Petroleum Institute said that crude stockpiles expanded by 4.8 million barrels last week while fuel supplies fell, according to a document seen by Bloomberg. The US Energy Information Administration is scheduled to release its data later on Wednesday.
“The Ukraine war has roared back into importance for investment markets,” said John Evans, an analyst at PVM Oil Associates. “The oil market will once again enter into another bout of geopolitical versus supply push and pull.”
Oil prices have been buffeted up and down by mixed signals on the two conflicts currently roiling world markets and the outlook for a supply surplus next year.
Ukrainian forces this week carried out their first strike on a border region in Russia using Western-supplied missiles, while the Kremlin updated its nuclear doctrine expanding the conditions for using atomic weapons. But Russian Foreign Minister Sergei Lavrov said on Tuesday that the country doesn’t want to see a nuclear war. Reuters reported the Kremlin is open to talks on a cease-fire deal with President-elect Donald Trump, ruling out major territorial concessions.
In the Middle East, the US has stepped up efforts to reach a cease-fire between Lebanese militant group Hezbollah and Israel before Joe Biden’s term ends as president, and Iran has agreed to stop producing uranium enriched near bomb-grade.
The International Energy Agency has warned that global oil markets face a sizeable surplus next year, even if the OPEC+ alliance doesn’t bring back curtailed production, in a context of uncertain demand growth in China.
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