Oil prices tanked on Wednesday, influenced by the latest data indicating a rise in US crude inventories and expectations of reduced tensions in the Middle East following a recent diplomatic mission.
Brent crude futures slipped by 11 cents, or 0.1%, settling at $77.09 per barrel by 06:30 GMT. Meanwhile, US West Texas Intermediate (WTI) crude saw a marginal decrease of 14 cents, or 0.2%, trading at $73.03 per barrel.
The American Petroleum Institute (API) reported a 347,000-barrel increase in US crude oil stocks for the previous week. This build-up in inventory suggests an oversupply situation, potentially putting downward pressure on oil prices. In contrast, gasoline and distillate stocks showed declines, with reductions of 1.043 million barrels and 2.247 million barrels respectively.
The US, being the world’s largest producer and consumer of oil, faces market implications from these inventory increases. Official government figures on US crude oil inventories are anticipated to be released later today at 10:30 a.m., which may further influence market dynamics.
In parallel, oil market sentiment was impacted by easing geopolitical tensions in the Middle East. US Secretary of State Antony Blinken concluded his visit to the region, aimed at facilitating a ceasefire agreement in Gaza.
The involvement of mediators from Egypt and Qatar, along with Blinken’s efforts, has sparked optimism regarding a potential US “bridging proposal.” This proposal could potentially narrow the divides in the ongoing conflict between Israel and Hamas, which has persisted for ten months.
ING commodities strategists noted that the prospect of a ceasefire between Israel and Hamas, coupled with ongoing concerns over global oil demand, has contributed to the recent decline in oil prices. They highlighted that while demand concerns have been prominent regarding China, refinery margins globally have faced pressures throughout August. This suggests that demand issues may not be confined solely to the Chinese market.
China’s economic difficulties continue to impact the oil market, with weak processing margins and diminished fuel demand leading to reduced operations at both state-run and independent refineries.
Customs data revealed a 7.4% decrease in crude oil imports from Russia in July compared to the previous year and a continued decline in fuel oil imports for the third consecutive month.
As the oil market adjusts to these various influences, the interplay of rising inventories and shifting geopolitical landscapes remains pivotal in shaping price trends.
