Oil up with weak dollar, supply concerns amid Middle East tension

By Zeynep Beyza Kilic

Oil prices increased on Wednesday supported by a weak dollar and expectations of tighter supply in the world amid ongoing tension in the Middle East.

International benchmark Brent crude traded at $82.31 per barrel at 10.26 a.m. local time (0726 GMT), with an 0.33% increase from the closing price of $82.04 a barrel in the previous trading session.

The American benchmark West Texas Intermediate (WTI) traded at $78.46 per barrel at the same time, a 0.40% rise from the previous session which closed at $78.15 per barrel.

The weakening of the US dollar against other currencies aided the rise in oil prices. The US dollar index, which measures the US dollar's value against other currencies, fell 0.12% to $103.67. The weak dollar is expected to enhance demand by making oil cheaper for those who use foreign currencies.

Global supply concerns heightened by ongoing tension in the Middle East continue to push oil prices higher.

The Yemen-based Houthi group has been targeting cargo ships in the Red Sea and the Gulf of Aden owned or operated by Israeli companies or transporting goods to and from Israel in solidarity with the Gaza Strip, which has been under an Israeli onslaught since Oct. 7.

On Tuesday, US and British warplanes launched fresh airstrikes in Yemen's coastal province of Al Hudaydah amid growing tensions in the Red Sea, according to the Houthi group. In response, the Yemen-based group announced that they carried out a military operation in the Red Sea against US warships.

Expectations of tighter supply due to output cuts from OPEC+ countries put upward pressure on oil prices. Several big producers in the OPEC+ group, including Saudi Arabia and Russia, agreed to extend their voluntary crude supply cuts until the end of June.

Saudi Arabia and Russia will cut daily output by 1 million barrels and 471,000 barrels, respectively, while Iraq and the UAE will reduce daily production by 220,000 barrels and 163,000 barrels, respectively.

Meanwhile, data showing crude inventory build-up in the US hints at demand decline in the world's biggest oil consumer limited oil price increase.

The American Petroleum Institute's latest estimate released on Tuesday revealed that crude oil inventories increased below market expectations, rising by 423,000 barrels last week and marking the fifth consecutive week of rises relative to the market prediction of a stock rise of 2.6 million barrels.

Official stock data from the US Energy Information Administration will be released later on Wednesday.