Investing.com– Oil prices rose to five-month highs in Asian trade on Thursday, extending a rash of recent gains as the prospect of worsening geopolitical conditions in the Middle East presented more potential supply disruptions.
The Organization of Petroleum Exporting Countries and allies also voted to maintain its current band of production cuts during a Wednesday meeting, presenting a tight outlook for crude in the near-term.
Brent oil futures expiring in June rose 0.3% to $89.64 a barrel, while West Texas Intermediate crude futures rose 0.3% to $84.90 a barrel by 21:13 ET (01:13 GMT).
Middle East tensions, Russian disruptions boost oil prices
Iran threatened retaliation for a perceived Israeli strike on its embassy in Damascus- pointing to worsening conditions in the Middle East. The threat also came as the Israel-Hamas war showed little signs of de-escalating, as a slew of recent ceasefire proposals fell through.
On the Russia-Ukraine front, attacks on key Russian refineries heralded more supply disruptions for Moscow. Several Russian oil and fuel refineries either cut production or were taken out of commission in the wake of Ukrainian drone strikes.
The storm of geopolitical factors presented a positive outlook for crude prices, especially given that more supply disruptions could further tighten markets.
Improving Chinese economy aids demand outlook
Crude prices were also cheered by improving economic conditions in top importer China, following a string of positive purchasing managers index readings for March.
Chinese manufacturing activity rose back into expansionary territory, while service sector growth also improved.
But the world’s largest oil importer still has a long road ahead in shoring up its economy, especially as it still grapples with the aftermath of the COVID-19 pandemic.
Mixed US inventories cap oil gains
But further gains in crude were held back by mixed readings on U.S. inventories, especially as official data showed an unexpected build in overall crude stockpiles.
The build came as U.S. production remained near record highs- a trend that is expected to somewhat offset a tight outlook for oil markets.
But U.S. fuel demand was also seen rebounding from winter lows, with gasoline inventories seeing a bigger-than-expected draw in the past week. The trend pointed to robust demand in the world’s largest fuel consumer.
