Oil pops on fresh Mideast jitters, but a supply glut keeps a lid on gains

Oil got a bump Wednesday, but not a breakout. Prices climbed about a buck after Israel’s strike on Hamas leaders in Qatar, Poland shot down drones amid Russia’s latest barrage over western Ukraine, and Washington pushed Europe to tighten the screws on Russian oil buyers. Then the fundamentals barged back in: swelling US inventories and a looming OPEC+ supply boost.

By late morning (11:28 a.m. ET), Brent was up $0.99 (1.9%) to $67.37, while WTI added $0.98 (1.5%) to $63.60. Both benchmarks briefly spiked nearly 2% in the immediate aftermath of the Israel-Doha strike before giving back a chunk of the pop. They’d already settled about 0.6% higher on Tuesday.

“Geopolitical risk premiums rarely last unless actual supply is knocked offline,” SEB analysts wrote, noting Brent is still about $2 below last Tuesday’s level.

For now, there’s no direct threat to physical flows from the Qatar strike or Poland’s defensive action, even if nerves are frayed.

Macro and policy tailwinds… for the moment

• Sanctions drumbeat: The White House is pressing the EU to ratchet up pressure on Moscow, with President Donald Trump urging 100% tariffs on China and India, both major buyers of Russian barrels. In DC meetings, EU chief Ursula von der Leyen said the bloc is weighing a faster phase-out of Russian fossil fuels in its next sanctions round.
• Fed watch: Traders still expect the Federal Reserve to cut rates next week, which would, in theory, juice growth and energy demand.

The EIA dropped a thud of a report:

• Crude inventories jumped +3.9 million barrels (vs. expectations for a –1.0 million draw).
• Gasoline stocks rose +1.5 million (vs. –0.2 million expected).
• Distillates (diesel/heating oil) surged +4.7 million (vs. a tiny +0.035 million expected).

“A very bearish report,” said John Kilduff of Again Capital. With summer driving winding down, “we’re waiting to see how much gasoline demand falls off a cliff—and it looks substantial.”

Weak export patterns and softer US data—especially in the labor market—aren’t helping the demand picture, he added.

Adding to the headwinds, the EIA cautioned Tuesday that prices face “significant pressure” in coming months as OPEC+ raises output and global inventories rebuild.

Yes, geopolitics put a floor under crude today: the Israel-Qatar strike, NATO’s first kinetic involvement in the Ukraine war zone (via Poland’s intercept), and a fresh sanctions push all argue for a modest risk premium. But without an actual supply disruption, the market keeps reverting to fundamentals—rising stocks, soft demand signals, and more OPEC+ barrels—which are capping rallies.

With input from Reuters and the New York Times.