In spite of a significant increase in US crude stocks, oil futures ended Thursday's trading session higher as conflicts in the Red Sea persisted and the Houthis, who are allied with Iran, intensified their attacks close to Yemen.
Brent crude futures ended the day higher, rising 64 cents, or 0.77%, to $83.67 per barrel. US West Texas Intermediate crude futures saw a 0.9% rise of 70 cents with a final settlement of $78.61 per barrel.
Amidst mounting pressure in the Middle East, Israel's Army Radio reported on Thursday that negotiators for a ceasefire are being sent to Gaza by the war cabinet of Prime Minister Benjamin Netanyahu.
The Houthis, a group supported by Iran in Gaza, have increased their attacks in the Red Sea and other areas and have used "submarine weapons," the leader of the group said on Thursday.
According to John Kilduff, a partner at Again Capital in New York, the Red Sea situation is still brewing, and the market is beginning to realize that this is a problem that will not go away.
Europe is suffering the most from a lack of supplies, but he noted, this will put pressure on US gasoline and diesel, turning European supply issues into American supply issues.
The differential between the front-month and second-month WTI crude futures reached 75 cents a barrel on Thursday. In recent sessions, that spread has grown, and on Tuesday, before the March contract's expiration, it reached $1.95 per barrel.
According to UBS analyst Giovanni Staunovo, market participants are probably factoring in a possible supply interruption in the near future, as evidenced by the widening premium of the front-month contract over the second, which points to a tightening market.
However, the increase in US oil stockpiles brought on by refinery maintenance and disruptions restricted Thursday's gains in crude prices.
The US Energy Information Administration reported on Thursday that US crude stocks increased by 3.5 million barrels, reaching 442.9 million barrels in the week that ended February 16, above analysts' estimates of a 3.9 million-barrel increase.
Although major refineries are about to resume production, America's crude stocks have increased as a result of outages that have caused utilization rates to drop to their lowest point in two years.
Based on a poll, analysts had predicted that refinery utilization rates would rise to 81.5%, but EIA data released on Thursday showed that rates remained steady from the previous week at 80.6%.
In March, after a power outage starting on February 1, BP's Whiting refinery in Indiana, which produces 435,000 barrels per day and is the biggest in the US Midwest, is expected to resume full production, as per individuals acquainted with plant operations.
TotalEnergies' 238,000 barrel-per-day refinery in Port Arthur, Texas, is also striving to restart, though it is currently only running at a minimum capacity after a weather-related power interruption.
Distillate inventories, including heating oil and diesel, have decreased as a result of the outages. As to the EIA statistics, the stockpiles decreased by 4 million barrels to 121.7 million barrels, compared with the expected decline of 1.7 million barrels.