Oil prices edge higher on Middle East tensions; around 2-week highs

Investing.com--Oil prices edged higher Wednesday, trading near the highest levels in two weeks as Middle East supply worries overshadowed a sharp increase in U.S. crude inventories and caution surrounding more trade tariff announcements by President Donald Trump.

At 08:00 ET (12:00 GMT), Brent Oil Futures expiring in September rose 0.3% to $70.35 per barrel and West Texas Intermediate (WTI) crude futures gained 0.3% to $68.56 per barrel.

Houthi attacks in Red Sea provide support

Both contracts climbed to a two-week high on Tuesday and remain around these levels, driven by supply disruption concerns from fresh Houthi attacks on Red Sea shipping lanes.

A Reuters report on Tuesday stated that four crew members aboard the Liberian-flagged, Greek-operated bulk carrier Eternity C were killed in a drone and speedboat assault off the coast of Yemen.

"Increased tensions in the Middle East, in the form of Houthi attacks on vessels in the Red Sea, will provide some support," said analysts at ING, in a note.

"Also, the market remains tight in the near term, as reflected in the timespreads. This will likely persist through the northern hemisphere summer, when we see seasonally stronger demand. The oil market only starts to loosen from the fourth quarter, when we expect to see more sustainable downward pressure on prices."

U.S. crude stocks jumped last week

The American Petroleum Institute (API) on Tuesday reported a sharp, unexpected rise in US crude oil inventories for the week ending July 4, with a build of 7.1 million barrels, far exceeding the forecast 2.8 million‑barrel draw. 

This comes after the previous week saw just a modest 0.68 million‑barrel increase.

However, gasoline inventories fell by 2.2 million barrels, while distillate stocks declined by 800,000 barrels.

Additionally, the Energy Information Administration released its latest Short Term Energy Outlook on Tuesday, revising lower U.S. crude oil production growth estimates for this year.

"The EIA now expects U.S. crude oil production to grow by around 160k b/d YoY to 13.37m b/d in 2025, compared to a previous growth estimate of around 210k b/d year on year. For 2026, the EIA expects U.S. oil supply growth to be flat," said ING. "However, the drastic slowdown in drilling activity suggests that there is downside for 2026 production."

Trump to impose 50% tariff on copper imports

President Trump said on Tuesday that he would impose a 50% tariff on imported copper and would soon roll out long-promised duties on semiconductors and pharmaceuticals.

A day earlier, he started sending tariff letters, where he notified 14 countries that sharply higher tariffs would take effect on August 1.

The tariff letters outlined a 25% levy on all goods from Japan and South Korea, while some nations face up to 40% tariffs.

Late Tuesday, Trump wrote on social media, “we will be releasing a minimum of 7 Countries having to do with trade, tomorrow morning, with an additional number of Countries being released in the afternoon.”

He provided no further details, while investors turned cautious in anticipation of a new wave of tariffs.

Ayushman Ojha contributed to this article