Crude stocks fell by 5.21 million barrels in the week ended Aug. 9 Gasoline inventories eased by 3.69 million barrels, and distillates rose by 612,000 barrels SINGAPORE: Oil prices climbed on Wednesday after an industry report showed US crude and gasoline inventories fell and as the market watched for a possible widening of the Israel-Gaza war, which may impact global oil supplies, according to Reuters. Brent crude futures rose 41 cents, or 0.5 percent, to $81.10 a barrel by 8:50 a.m. Saudi time. US West Texas Intermediate crude increased by 41 cents, or 0.5 percent, to $78.76 per barrel. “The American Petroleum Institute (API) reported a significant drawdown in US crude inventories of 5.2 million barrels, far more than a forecasted decline of 2 million. The data signalled that oil demand remains healthy,” said Danish Lim, investment analyst at Phillip Nova. “Nevertheless, geopolitics remain the elephant in the room, as the likelihood of an escalation in Middle East tensions could serve as upside risk to oil prices over the coming weeks.” The API figures showed crude stocks fell by 5.21 million barrels in the week ended Aug. 9, according to market sources citing the data. Gasoline inventories eased by 3.69 million barrels, and distillates rose by 612,000 barrels. Falling inventories could indicate higher demand in the US, the world’s biggest oil consumer. Official government data from the Energy Information Administration is due later on Wednesday. In the Middle East, key oil producer Iran has vowed a severe response to the killing of the leader of Hamas late last month. Israel has neither confirmed nor denied its involvement but it is fighting in Gaza against Hamas after the group attacked Israel in October. To counter Iran, the US Navy has deployed warships and a submarine to the Middle East. Iran has not yet retaliated against the assassination but any escalation of the conflict in the Middle East is a clear upside risk to oil prices over the next six months and potentially even longer, said Vivek Dhar, analyst at Commonwealth Bank of Australia. “The extent of Iran’s reprisal, as well as Israel’s response, will likely determine whether the current conflict in the Middle East broadens into a regional conflict,” said Dhar. “The immediate market concern will be attacks on Iran’s oil supply and infrastructure. Iran accounts for 3-4 percent of global oil demand, of which, 25-50 percent is exported.” An ANZ Research in a note on Wednesday added that a broader conflict in the Middle East could also threaten oil moving through key choke points in the region. “This could expose over 20 million barrels per day of oil to risks of disruption,” it said. Capping oil price gains however, the International Energy Agency, kept its 2024 global oil demand growth forecast unchanged on Tuesday but trimmed its 2025 estimate, citing the impact of a weakened Chinese economy on consumption.