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Investing.com-- Oil prices rose sharply in Asian trade on Wednesday after a deadly blast at a Gaza hospital appeared to have stymied a U.S. diplomatic effort in the Israel-Hamas war, while industry data showed that U.S. inventories shrank more than expected last week.
The White House said U.S. President Joe Biden will not visit Jordan as part of his Israel trip, after Jordan’s Foreign Minister Ayman Safadi said that a planned summit between U.S., Egyptian and Palestinian leaders will not take place. The trip was seen as an attempt to maintain support for Israel while also placating Arab states and preventing a bigger escalation in the conflict.
The move came just a few hours after an explosion at a crowded hospital in Gaza City reportedly killed hundreds of Palestinians, which was blamed on both Israeli and Hamas forces. The blast drew ire from the international community, and dampened hopes for a swift deescalation in tensions in the Middle East.
This in turn fueled renewed concerns that a spillover of the Israel-Hamas conflict could disrupt crude supplies in the oil-rich Middle East region- a notion that had boosted oil prices through the past week.
The news helped oil prices reverse most losses seen earlier this week, with Brent futures now sitting comfortably above the key $90 a barrel level.
Brent oil futures rose 0.8% to $91.60 a barrel, while West Texas Intermediate crude futures jumped nearly $1 to $87.26 a barrel by 20:19 ET (00:19 GMT).
Fears of an escalation in the Israel-Hamas war, particularly that other Middle Eastern countries could join the fray, had boosted oil prices over the past week, helping them shrug off headwinds from a stronger dollar and fears of higher interest rates.
Markets also largely looked past reports that the U.S. was close to lifting sanctions on Venezuela, given that any supply unlocked from such a move appeared unlikely to help soothe tight global crude markets.
In another sign of tight supplies, data from the American Petroleum Institute showed on late-Tuesday that U.S. inventories shrank 4.4 million barrels in the week to October 13, more than expectations for a draw of 1.3 million barrels.
The draw comes after a bumper build in the prior week, which also saw U.S. production reach new peaks. But the API data indicated that U.S. exports had picked up again, while gasoline and distillates consumption remained steady.
Robust retail sales and industrial production data also pointed to strength in the U.S. economy, likely indicating that fuel demand will remain strong amid tightening supplies. Focus is now on official inventory data, due later on Wednesday.
Expectations of tighter global oil supplies, following deep production cuts by Saudi Arabia and Russia, underpinned oil prices earlier this year, and are also expected to keep crude supported in the coming months, despite increasing economic headwinds.
On that front, markets were now awaiting third-quarter gross domestic product data from world no.1 oil importer China. The reading, which is due later in the day, is expected to show a continued deterioration in economic growth, as China struggles to shore up business activity.
More cues on the U.S. economy are also due this week, most notably an address by Federal Reserve Chair Jerome Powell on Thursday.
