WTI drifts higher above $70.50 on fears over Middle East supply disruptions

• WTI gains traction to near $70.60 in Thursday’s early Asian session. 
• Middle East geopolitical tensions lift WTI price.
• Large US crude inventories built last week might cap the upside for WTI. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $70.60 on Thursday. The WTI price extends its upside as traders assess oil supply risks in the Middle East after Iran’s missile attack on Israel earlier this week. 

Israel’s Prime Minister Benjamin Netanyahu vowed to retaliate against Iran after the Islamic Republic fired scores of ballistic missiles at Israel on Tuesday. Oil traders are concerned the latest escalation could hit flows if energy facilities are attacked or supply routes blocked, which boosts the WTI price. 

According to Citigroup, a major attack by Israel on Iran's oil-exporting capabilities might remove 1.5 million barrels per day from the market. “This fresh escalation is serious and justifies oil’s jump,” said Bill Farren-Price, a veteran oil market watcher and senior research fellow at the Oxford Institute for Energy Studies.

Nonetheless, a large build in US crude inventories last week might limit the black gold’s gains. According to the Energy Information Administration, crude oil stockpiles in the United States for the week ending September 27 rose by 3.889 million barrels, compared to a fall of 4.471 million barrels in the previous week. The market consensus estimated that stocks would decline by 1.25 million barrels.