Oil rises on weak US production data, geopolitical tensions

Oil prices rose on Thursday, driven by a reported decline in U.S. crude production, intensifying geopolitical tensions, and growing expectations of interest rate cuts from the US Federal Reserve.

International benchmark Brent crude rose 0.6% to $80.27 per barrel at 10.37 a.m. local time (0737GMT), down from the previous session's close of $79.76. US benchmark West Texas Intermediate (WTI) climbed 0.3% to $77.19 per barrel, after closing at $76.98 in the prior session.

Both benchmarks climbed after the Energy Information Administration (EIA) reported a 128,000 barrel per day (bpd) drop in U.S. crude oil production, bringing output down to approximately 13.6 million bpd for the week ending Aug. 9.

Concerns over potential supply shortages have pushed oil prices higher.

Ongoing global geopolitical tensions are also driving prices up, as market participants remain wary of supply disruptions.

Late Wednesday, the Israeli army announced it had killed two Hezbollah fighters in a drone strike on the town of Marjayoun in southern Lebanon. This was the first Israeli strike on the town since hostilities between Israel and Hezbollah intensified last October.

Tensions in the region, which holds the majority of global oil reserves, are intensifying concerns over potential supply disruptions and supporting upward price movements.

Additionally, the escalating conflict between Ukraine and Russia is further driving crude prices by fueling supply fears.

On Wednesday, Russian authorities ordered the mandatory evacuation of a village and district in the Kursk region, where Ukrainian forces launched an incursion last week.

Meanwhile, market expectations for a Fed rate cut in September have risen following data showing that U.S. inflation slowed in July.

This development has alleviated concerns about the U.S. economy and reinforced the belief that oil demand will rise in the world's largest oil consumer.