Brent crude oil futures eased to around $66 per barrel on Wednesday, slightly trimming a 2.6% rally from the previous session as markets digested a mixed set of supply-demand signals.
Brent eases on higher US stockpiles
The pullback followed an industry report from the American Petroleum Institute (API) indicating an unexpected build in US crude inventories, which surged by 4.29 million barrels last week—the largest increase in six weeks—defying analysts' expectations for a drawdown of around 2.4 million barrels. The surprise stockpile rise raised some concerns over near-term oversupply conditions, particularly in the US, the world’s largest oil producer.
Nonetheless, the overall picture remained somewhat supportive, with gasoline inventories declining by 1.4 million barrels and distillate stocks falling sharply by 3.7 million barrels, reflecting stronger fuel demand amid the onset of the summer driving season in the Northern Hemisphere. The drawdowns in refined product inventories helped cushion the downside in crude prices, as they signaled healthy consumption patterns and tightening refined product markets.
Despite the crude build, Brent prices hovered near a two-week high, bolstered by geopolitical tensions and an improving macro backdrop. Renewed threats of sanctions escalation against Iran added to supply risk premiums, as the US administration signaled it might pursue tougher measures targeting Iranian oil exports, particularly ahead of President Trump’s anticipated trip to the Middle East later this month. The visit, strategically timed during the seasonal peak in global fuel demand, is expected to focus partly on securing oil price stability and shoring up alliances with key regional producers.
Support from the temporary US-China tariff reduction deal
Oil markets also continued to draw support from the temporary US-China tariff reduction deal, which eased fears of an abrupt slowdown in global trade flows and boosted broader risk sentiment. The improved trade backdrop, coupled with a weakening US dollar—making dollar-denominated commodities cheaper for non-US holders—added additional layers of support for crude prices.
Looking ahead, traders are eyeing official US Energy Information Administration (EIA) inventory data for further confirmation of the API’s figures, as well as signals from the upcoming OPEC+ ministerial monitoring meeting. Speculation is growing that the alliance may extend voluntary output restraint measures to prevent a renewed supply glut, especially as global economic uncertainties and high inventory levels in key consuming regions persist. At the same time, attention is turning to the pace of US shale production recovery and any potential shifts in output policy from Saudi Arabia and Russia, as oil markets remain delicately balanced between bullish geopolitical risks and lingering concerns over demand fragility.
