Oil prices inch higher as U.S. stockpile draw offsets supply concerns
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Oil prices rose slightly on Wednesday, recovering from two-month lows after data from the American Petroleum Institute (API) indicated a decline in U.S. crude stockpiles. Brent crude edged up 0.3% to $73.26 per barrel, while U.S. West Texas Intermediate (WTI) futures gained 0.3% to $69.16 per barrel.
Market sentiment turned more cautious after API reported a 640,000-barrel decline in U.S. crude inventories for the week ending February 21. If confirmed by official Energy Information Administration (EIA) data later today, it would mark the first drop in U.S. stockpiles since mid-January. However, Reuters analysts had expected a 2.6-million-barrel increase, creating uncertainty about the supply outlook.
On the geopolitical front, the market is closely watching signs of progress in peace talks between Russia and Ukraine, as well as a potential minerals deal between the U.S. and Ukraine. ING strategists noted that such developments could pave the way for an easing of Russian sanctions, which would reduce the supply uncertainty that has clouded the oil market for months.
However, macroeconomic headwinds are limiting the upside for crude prices. Weak economic data from both the U.S. and Germany weighed on sentiment, with U.S. consumer confidence in February recording its steepest drop in 3.5 years and 12-month inflation expectations rising sharply. Meanwhile, the German economy contracted in Q4 2024, further fueling concerns over global demand.
Adding to the pressure, investors remain wary of potential trade policy shifts from U.S. President Donald Trump, particularly regarding tariffs on China and other trading partners. The prospect of increased economic strain could dampen demand expectations, countering recent supply-side disruptions.
Despite fresh U.S. sanctions targeting Iran, which could lead to a reduction of up to 1 million barrels per day in Iranian crude exports, analysts see ample supply from OPEC+ members in the coming months, potentially balancing any shortfalls. Commodity Context analyst Rory Johnston noted that additional production from OPEC+ could cap further price gains, keeping the market well-supplied in the near term.
With key economic and geopolitical developments still unfolding, oil traders remain cautious, balancing concerns over demand weakness with evolving supply risks. The market will be closely monitoring today’s EIA inventory data for further direction.
Market sentiment turned more cautious after API reported a 640,000-barrel decline in U.S. crude inventories for the week ending February 21. If confirmed by official Energy Information Administration (EIA) data later today, it would mark the first drop in U.S. stockpiles since mid-January. However, Reuters analysts had expected a 2.6-million-barrel increase, creating uncertainty about the supply outlook.
On the geopolitical front, the market is closely watching signs of progress in peace talks between Russia and Ukraine, as well as a potential minerals deal between the U.S. and Ukraine. ING strategists noted that such developments could pave the way for an easing of Russian sanctions, which would reduce the supply uncertainty that has clouded the oil market for months.
However, macroeconomic headwinds are limiting the upside for crude prices. Weak economic data from both the U.S. and Germany weighed on sentiment, with U.S. consumer confidence in February recording its steepest drop in 3.5 years and 12-month inflation expectations rising sharply. Meanwhile, the German economy contracted in Q4 2024, further fueling concerns over global demand.
Adding to the pressure, investors remain wary of potential trade policy shifts from U.S. President Donald Trump, particularly regarding tariffs on China and other trading partners. The prospect of increased economic strain could dampen demand expectations, countering recent supply-side disruptions.
Despite fresh U.S. sanctions targeting Iran, which could lead to a reduction of up to 1 million barrels per day in Iranian crude exports, analysts see ample supply from OPEC+ members in the coming months, potentially balancing any shortfalls. Commodity Context analyst Rory Johnston noted that additional production from OPEC+ could cap further price gains, keeping the market well-supplied in the near term.
With key economic and geopolitical developments still unfolding, oil traders remain cautious, balancing concerns over demand weakness with evolving supply risks. The market will be closely monitoring today’s EIA inventory data for further direction.