Oil Prices Drop on Increased U.S. Inventories and Dollar Strength
Industry Data Indicating Rise in Crude and Fuel Inventories
By Ahmad Ghaddar
Oil prices experienced a decline on Wednesday following the release of industry data highlighting an increase in crude and fuel inventories in the United States. Additionally, the strengthening of the U.S. dollar has signaled a decrease in demand for oil.
Price Movements
Global oil prices dropped, with futures falling by 0.6% to $82.64 a barrel, while U.S. West Texas Intermediate crude futures decreased by 0.9% to $77.71 a barrel by 1400 GMT. Both benchmarks saw a slight decline in the previous session due to signs of easing supply tightness and weakening global oil demand as reported by the EIA.
Inventory Rise
Market sources revealed that crude stocks surged by 509,000 barrels in the week ended May 3, according to the American Petroleum Institute. Gasoline and distillate fuel inventories also experienced an increase.
Market Analysis
Analysts at ING commented on the data, stating that the stock builds in both crude and products had a moderately bearish impact on the market. Concerns over lower-than-usual U.S. gasoline demand and the stock build have affected the prompt RBOB gasoline crack.
Upcoming Data Release
Official U.S. government data on stockpiles is expected at 1430 GMT. Analysts predict a decline of approximately 1.1 million barrels in U.S. crude oil inventories last week.
Impact of Stronger U.S. Dollar
The strengthening U.S. dollar has added pressure on oil prices, making it costlier for holders of other currencies to purchase oil.
Geopolitical Factors
The possibility of a ceasefire in Gaza has also influenced oil prices recently. Analysts highlight a decrease in the risk premium on oil as negotiations for a ceasefire progress.
Outlook on Oil Prices
Morgan Stanley analysts project a reduction in geopolitical risks for oil prices and have removed a $4 risk premium for the third quarter. They anticipate strong fundamentals supporting Brent prices around $90 a barrel over the summer.
OPEC+ Discussions
Concerns about supply cuts by OPEC+ members before the June 1 policy meeting have created uncertainty. Russian Deputy Prime Minister Alexander Novak mentioned discussions on increasing output, adding to market speculation.
(Additional reporting by Trixie Yap in Singapore; editing by Jason Neely, Kirsten Donovan)
