Oil rises as supply concerns persist despite Middle East crude exports recovering to prewar levels

Oil prices edged higher as Middle East crude exports continued to recover toward prewar levels, easing some immediate supply concerns even as risks around regional shipping and the U.S.-Iran conflict persisted.

U.S. crude inventories unexpectedly rose last week.December Brent crude futures gained 0.5% to $98.56 a barrel on Thursday, while West Texas Intermediate futures were up 0.4% to $88.70 a barrel. Both contracts traded lower initially before rebounding.

Major banks have raised their oil-price forecasts as the Iran conflict and the risk of renewed supply disruptions remain unresolved. A Wall Street Journal survey of projections from banks including Goldman Sachs, J.P. Morgan and Morgan Stanley put Brent at an average of $90.22 a barrel in the fourth quarter and WTI at $85.47, up from previous estimates of $78.92 and $74.62, respectively.

Meanwhile, Middle East crude exports have rebounded to 17.5 million barrels a day on a 10-day average, or 98% of prewar levels, J.P. Morgan analysts said. The recovery has been supported by restored flows through Saudi Arabia’s East-West pipeline and greater use of alternative export routes.

Excluding Iran, at least 16.5 million barrels a day of crude left the Middle East Gulf region in September, matching its prewar average, according to Kpler. Around 40% of those exports bypassed the Strait of Hormuz, up from 17% before the war, with 23% loading outside the strait along the Gulf of Oman and another 17% leaving through the Red Sea. The remaining 60% crossed Hormuz, much of it using shuttle tankers and ship-to-ship transfers.

U.S. crude inventories also unexpectedly rose last week. Commercial crude stocks increased by 900,000 barrels to 427.3 million barrels in the week ended Sept. 25, according to the U.S. Energy Information Administration, while analysts surveyed by The Wall Street Journal had expected a 200,000-barrel decline. Refinery utilization fell to 92.5% from 94% a week earlier. Gasoline stocks fell by 1.7 million barrels and distillate inventories dropped by 2.3 million barrels, leaving both well below their five-year seasonal averages.

Write to Farhan Rafid at farhan.rafid@wsj.com