Investing.com -- Oil prices edged higher Wednesday, continuing the prior session's sharp gains on heightened geopolitical tensions as well as signs of a weakening US labor market.
At 09:00 ET (14:00 GMT), Brent oil futures rose 0.5% to $74.01 a barrel, and West Texas Intermediate crude futures gained 0.5% to $70.32 a barrel.
Both contracts surged over 2% on Tuesday.
Israel-Lebanon tensions in focus amid ceasefire violations
Oil was buoyed by heightened tensions in the Middle East after Israel threatened to attack the Lebanon state if its ceasefire with Hezbollah fell through.
The threat came as Israel and Hezbollah both launched strikes against each other despite agreeing to a U.S.-brokered ceasefire last week.
Israeli Defence Minister Israel Katz threatened to hold Lebanon responsible for not disarming Hezbollah.
The recent strikes and rhetoric suggested that last week’s ceasefire may not hold, presenting the prospect of heightened tensions in the Middle East and keeping oil’s risk premium in play.
US private payrolls growth slows
US private payrolls growth slowed in November, raising hopes of another interest rate cut by the Federal Reserve later this month, which could boost economic activity in the world' largest consumer of energy.
Private payrolls rose by 146,000 jobs last month, after advancing by a downwardly revised 184,000 in October, the ADP National Employment Report showed on Wednesday.
Economists had forecast private employment increasing by 166,000 positions after a previously reported gain of 233,000 in October.
The ADP report was published ahead of Friday's more comprehensive and closely watched employment report for October from the Labor Department's Bureau of Labor Statistics.
Financial markets are pricing in about a 70% chance of a quarter-of-a-percentage point interest-rate cut by the Federal Reserve this month, which would bring the policy rate to the 4.25%-4.50% range.
They are betting on another two rate cuts by the end of next year, a slower pace than Fed officials had projected in September, but further signs of a dramatic slowdown in the labor market cut result in further cuts being factored in.
US oil inventories grow - API
However, oil’s momentum was stalled by industry data showing an unexpected increase in US oil inventories.
Data from the American Petroleum Institute showed oil stockpiles grew 1.2 million barrels (mb) in the week to Nov. 29, compared to expectations for a draw of 2.1 mb.
The reading pushed up some concerns that demand in the world’s biggest fuel consumer was easing, especially with the advent of the winter season.
The API data precedes government inventory data, which is due later on Wednesday.
OPEC+ meeting awaited for supply cues
Market focus was also on a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+) on Thursday, where the cartel is widely expected to further delay plans to increase production.
The OPEC+ has steadily cut its outlook for oil demand in 2024 and 2025, citing concerns over slowing growth in top importer China.
Any extension in the OPEC's ongoing supply cuts are likely to buoy oil prices going into 2025 by tightening markets.
(Ambar Warrick contributed to this article.)