Oil Prices Drop in Asia Amid US Inventory Increase and Middle East Unrest
Oil prices in Asian trade saw a decline on Wednesday, influenced by industry data indicating a rise in U.S. inventories. Despite this, concerns over geopolitical tensions in the Middle East helped limit the losses.
U.S. Inventory Growth Triggers Concerns
The late-Tuesday release of industry data revealed an unexpected increase in U.S. inventories for the week ending May 3. This unexpected growth undermines expectations of tighter global supplies.
Meanwhile, Israel continued its strikes on Rafah in Southern Gaza, with ceasefire negotiations showing little progress.
Crude oil prices for July dropped by 0.4% to $82.82 a barrel, while Brent crude fell 0.4% to $77.76 a barrel by 21:35 ET (01:35 GMT).
Additionally, the strength of the U.S. dollar contributed to the pressure on oil prices as Federal Reserve officials downplayed the possibility of lower interest rates this year.
U.S. Oil Inventories Build Unexpectedly – API Report
The American Petroleum Institute (API) reported on Tuesday that U.S. oil inventories increased by 0.5 million barrels for the week ending May 3, contrary to analysts’ expectations of a draw of 1.4 million barrels.
The unexpected build in U.S. inventories comes after a similar trend in the previous week, fueling speculations that global oil markets might not be as tight as initially thought.
The API data usually precedes a similar report from the Energy Information Administration (EIA), due later on Wednesday.
High U.S. supplies have dampened hopes of a tighter global oil market, especially with recent figures indicating record-high oil production in February.
Middle East Tensions and Uncertainty over Israel-Hamas Ceasefire
Israel’s continued offensive against Rafah led to the seizure of a crucial main border crossing in the city on Tuesday. Despite Hamas officials reportedly accepting a ceasefire proposal, Israel rejected it, causing further strained relations.
The ongoing conflict adds to the concerns over the Middle East’s instability, potentially disrupting oil supplies in the region.
While U.S. officials remain optimistic about reaching a ceasefire, negotiations between the two sides are ongoing in Cairo.
The geopolitical uncertainties and unrest in the region continue to impact oil prices, reflecting the market’s anticipation of potential disruptions in supply.
