Oil Futures Extend Gains on Geopolitical Turmoil


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil prices rose for a third consecutive trading day 
Wednesday morning, after an Israeli strike on the political arm of Hamas in 
Qatar, Polish air defense downing drones for the first time and threats of new 
sanctions on Russia all raised the geopolitical risk premium. A surprising 
decline in U.S. producer prices last month added to bullish sentiment, but 
gains were kept in check by bearish fundamentals and an industry report showing 
across-the-board builds in U.S. oil inventories.

   NYMEX-traded WTI for October delivery rose $0.66 to trade near $63.29 bbl, 
and ICE Brent for November delivery gained $0.67 to $67.06 bbl.

   October RBOB gasoline futures added $0.0144 to $2.0069 gal, and the 
front-month ULSD contract was up $0.0046 to $2.3245 gal.

   The U.S. dollar index softened by 0.127 points to 97.625.

   Tuesday's attack on a Hamas delegation in the capital city of U.S. ally 
Qatar sparked fears of escalation in the region and further decreased chances 
of a peaceful resolution to the ongoing conflict. At the same time, Ukraine 
stepped up its attacks on Russian energy infrastructure, striking multiple 
crude oil and natural gas pipelines over the last 48 hours. On Wednesday, 
Poland shot down drones in its airspace, marking the first military action by a 
NATO member state since Russia's invasion of Ukraine. It was not immediately 
clear if the drones were of Russian or Ukrainian origin. U.S. President Trump, 
meanwhile, reportedly asked EU officials to impose tariffs of up to 100% on 
China and India to dissuade them from purchasing Russian oil, according to the 
Financial Times. EU members are in the process of discussing and finalizing the 
19th sanctions package on Russia.

   The Bureau of Labor Statistics on Wednesday reported producer prices 
unexpectedly declined last month, potentially raising the odds of Federal 
Reserve interest rate cuts, which in turn would help boost demand. The Producer 
Price Index fell 0.1% month-on-month in August, compared with analyst 
expectations of a 0.3% increase.

   The American Petroleum Institute on Tuesday reported builds to domestic 
crude oil, gasoline and distillate fuel oil inventories, with U.S. commercial 
crude oil stocks expanding by 1.25 million bbls last week. Official government 
oil inventory data from the U.S. Energy Information Administration is scheduled 
for 10:30 AM ET release today.




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