© Reuters.

Investing.com — Oil prices rose Wednesday as the killing of a senior Hamas leader raised concerns that the conflict between Israel and Hamas could widen, increasing the likelihood of supply disruptions through the crucial Red Sea region.

By 09:10 ET (14.10 GMT), the futures traded 1.1% higher at $71.12 a barrel and the contract climbed 1.2% to $76.82 a barrel.

Rising tensions in Red Sea

The Hamas deputy leader Saleh al-Arouri was killed in a drone strike in Beirut, the capital of Lebanon, in a further sign that the nearly three-month war between Israel and Hamas was spreading across the region.

Israel has neither confirmed nor denied that it killed the highly ranked Hamas leader, but it has kept up its assault on the Gaza Strip on Wednesday while Houthi rebels have also continued to attack vessels in the Red Sea.

A wider conflict could close crucial waterways for oil transportation, adding a premium to the market.

“While the geopolitical situation is a concern for the oil market, a fairly comfortable oil balance over the first half of 2024 does help to ease some of these worries,” said analysts at ING, in a note.

U.S. inventories due 

The global oil balance has been impacted by U.S. production coming in at record highs in recent weeks, resulting in the market being less tight than initially expected in the first quarter of 2024. 

U.S. crude stockpiles from the industry group are due later Wednesday, a day later than usual due to Monday’s New Year’s holiday, ahead of the official data on Thursday.

A series of builds in U.S inventories over the past few weeks have rattled oil markets, especially as rising gasoline and distillate stockpiles pointed to cooling fuel demand in the largest consumer in the world.

OPEC+ to meet in February – Bloomberg

The Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, will hold a Joint Ministerial Monitoring Committee meeting in early February, according to Bloomberg, with the members keen to discuss the state of the oil market.

“However, given the scale of cuts we are already seeing, it will be increasingly difficult for the group to cut more if needed over the course of 2024. Already, the last few rounds of cuts have been driven by voluntary reductions from individual members rather than group wide cuts – a sign that it is becoming more difficult to get all members on board to cut,” ING added.

(Ambar Warrick contributed to this article.)