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Prices of oil rise after Israeli attacks but oversupply limits gains

The oil prices increased on Wednesday, after Israel targeted Hamas leaders in Qatar and Poland shot down drones. Meanwhile, the U.S. pushed for new sanctions against Russian oil buyers. However, concerns about crude oversupply limited further gains.

Brent crude futures rose 56 cents or 0.8% to $66.95 a barrel as of 0835 GMT. U.S. West Texas Intermediate Crude futures also gained 56 cents or 0.9% to $63.19 a barrel.

The previous trading session saw prices rise by 0.6% after Israel announced that it had attacked Hamas leaders in Doha.

After the attack, both benchmarks gained nearly 2% but then lost much of that gain.

Geopolitical tensions rose in other places as well when Poland, the first NATO member to fire in this war, shot down drones on Wednesday during an attack by Russia in western Ukraine. There was no immediate danger of a disruption in supply.

Brent is trading two dollars lower than it did last Tuesday. SEB analysts stated that geopolitical risks premiums on oil are rarely sustained unless there is a supply disruption.

Sources say that Donald Trump, the U.S. president, has asked the European Union (EU) to impose tariffs of 100% on China and India in order to exert pressure on Russian President Vladimir Putin.

China and India have been major purchasers of Russian oil since Russia launched its invasion of Ukraine 2022.

Analysts at LSEG said that there is still uncertainty about how far the Administration will go. Aggressive action could interfere with efforts to control inflation and influence Federal Reserve to lower interest rates.

The Federal Reserve is expected to reduce interest rates during its meeting on September 16-17, which will boost the economy and increase demand for oil.

The outlook for supply is still bearish. Energy Information Administration warned that global crude prices would be significantly impacted by rising inventories in the months to come as OPEC+ increased output.

Market sources cited American Petroleum Institute data on Tuesday to report that U.S. crude oil, gasoline, and distillate stock levels rose in the last week. The government data will be released at 1430 GMT.

(source: Reuters)