Gaza Tensions, Huge Supply Build Immobilize Traders - And Oil Prices

Meanwhile, the Trans Mountain pipeline aims to turn a profit in 2026: File Image/Pixabay

Oil on Thursday maintained its range bound status thanks to the push-pull elements that informed the previous session’s trading activity, namely, the potential for geopolitical tensions to disrupt supply and the unexpected increase in U.S. crude and gasoline stockpiles.

As of 12:25 EDT, Brent was up 45 cents at $85.70 per barrel, and West Texas Intermediate was up 32 cents at $81.22.

The worries focused on the Israel/Hamas conflict, stoked on Wednesday by the United Nations stating it was concerned by the possible spread of the Gaza war across the region and reiterating reports that 528 Palestinians have been killed by Israeli security forces or settlers in the West Bank since the Gaza war began.  

Helima Croft, head of global commodity strategy at RBC, wrote in a note, “Israel’s offshore gas operations could also be attacked by Hezbollah.

“However, the real threat to regional energy supplies would be if Iran targeted critical infrastructure to internationalize the cost the conflict, or if Israel targeted Iranian energy facilities.”

John Evans, analyst at PVM, added, “If it were not for the steady and incremental ratcheting up of geopolitical risk in the Middle East, oil prices might have found themselves on the back end of a much more negative day.”

Equally significant, the U.S. Energy Information Administration reported a 3.6 million barrel jump in the country's crude stocks last week, the highest climb in over three years; analysts had anticipated a 2.9 million drawdown.

U.S. gasoline stocks rose by 2.7 million barrels; analysts had expected a 1 million barrel draw.

John Kilduff, founding partner at Again Capital, said, "Yesterday’s EIA report is still an overhang for the market today as it was a surprise in terms of the builds we saw, and the refinery run rates."

In other oil news on Thursday, following media excitement over the newly expanded Trans Mountain oil pipeline helping to change the export landscape, according to company filings with Canadian regulators the pipeline will rely on spot customers to see a positive equity return or return on capital in 2026.

The Trans Mountain Expansion Project (TMX), which became operational last month, has reserved 20 percent of its capacity – or 178,000 barrels per day (bpd) – to uncommitted customers, or spot shippers; financial projections reveal that the government-owned corporation expects its capacity to be 96 percent full starting in 2025, and this would result in a positive equity return in 2026.