US crude inventories were reduced by approximately 4.4 million barrels during the week ending 13 October 2023. Credit: drpepperscott230 from Pixabay.

Crude oil prices have surged by 2% over concerns about potential disruptions to oil supply from the Middle East following an explosion at a Gaza hospital that claimed hundreds of lives.

Brent crude futures increased by $1.69 or 1.9% to reach $91.59 a barrel (/bbl) at 03:47 GMT while West Texas Intermediate crude (WTI) futures grew by $1.84 or 2.1% to settle at $88.50/bbl, reported Reuters.

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Israeli and Palestinian officials blamed each other for the blast that occurred at a Gaza City hospital on 17 October 2023, killing around 500 Palestinians.

This incident triggered protests in the West Bank and around the Middle East region.

The explosion occurred the day before a scheduled visit by US President Joe Biden to Israel to offer support for the latter in its war against Islamist militant group Hamas, according to Reuters.

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Subsequently, the summit, which was to host Biden and Egyptian and Palestinian leaders, has been called off.

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In a client note, Commonwealth Bank of Australia analyst Vivek Dhar was quoted by the news agency as saying: “The cancellation of a summit between Biden and Arab leaders reduces the likelihood of a diplomatic solution to the Israel Hamas conflict.

“A long occupation looms as the scenario that pushes Brent oil futures above $US100/bbl because it raises the risk that the Israel Hamas conflict expands and potentially draws in Iran directly.”

Prior to the blast, Gaza health authorities said at least 3,000 people have been killed in 11-day bombardment by Israel. The military clash between Israel and Hamas began after the latter’s attack on 7 October 2023.

Meanwhile, bolstering oil prices further, US crude inventories saw a decline of approximately 4.4 million barrels during the week ending 13 October, according to sources citing information from the American Petroleum Institute.