Oil prices rise on improved wider sentiment; demand fears persist

Investing.com -- Oil prices rose Wednesday, helped by the improved wider risk sentiment and raised Middle East tensions, but remained near seven-month lows given persistent concerns over slowing economic growth and weak demand. 

At 08:05 ET (12:05 GMT), Brent oil futures rose 2.2% to $78.16 a barrel and West Texas Intermediate crude futures gained 2.4% to $74.97 a barrel. 

The commodities complex was unable to escape the broader sell-off in risk assets at the start of the week, but a degree of confidence has returned to the markets, with Wall Street trading in the green, and this has helped sentiment in the oil markets. Middle East tensions in focus

Additionally, traders remained focused on any new developments in the Israel-Hamas war, with Hamas set to potentially retaliate against Israel over the killing of its leader last week.

Fears of a broader conflict in the region have offered some support to crude in recent sessions, as traders feared that an all-out war in the Middle East could disrupt supplies.

U.S. officials have been in constant contact with allies and partners in the region and there is a "clear consensus" that no one should escalate the situation, Secretary of State Antony Blinken said on Tuesday. Demand, recession fears rattle oil markets

That said, oil prices remain near seven-month lows on growing concerns that a U.S. recession will dent oil demand in the coming months. 

A slew of weak labor data and purchasing managers index readings from the U.S. furthered this notion over the past week, sparking a rout in most commodity markets. 

Oil was already grappling with a weak outlook on demand as the Chinese economy, the largest importer of crude, struggled to show growth, pointing to a market surplus by 2025. 

A recent meeting of the Organization of Petroleum Exporting Countries did little to buoy crude, as the cartel signaled no changes to production despite weakness in prices. But top producers Saudi Arabia and Russia did further downplay plans to increase production later this year.  US inventories grow less than expected - API 

Data from the American Petroleum Institute showed that U.S. oil inventories grew by 180,000 barrels in the week to August 2, less than expectations for a build of 850,000 barrels. 

But gasoline stockpiles rose by 3.3 million barrels while distillates grew 1.2 million barrels.

The build in product inventories suggested that travel demand was cooling as the summer season came to an end. While increased travel during the summer season had spurred strong fuel demand, this trend was now likely to reverse.

The API data usually heralds a similar reading from official inventory data , which is due later on Wednesday. 

(Ambar Warrick contributed to this article.)

Source: Investing.com