Oil prices experienced a downturn in early Asian trading on Wednesday, driven by data indicating a buildup in both crude and fuel inventories in the United States. This development underscores weakened demand, coupled with cautious expectations regarding supply ahead of an impending OPEC+ policy meeting next month.
Brent crude oil futures saw a decline of 30 cents, or 0.36%, settling at $82.86 per barrel by 0348 GMT. Concurrently, U.S. West Texas Intermediate crude futures dropped 25 cents, or 0.32%, to $78.13 a barrel.
Both benchmark indices experienced marginal declines in the preceding session, attributed to signs of supply loosening and subdued global oil demand as highlighted in an EIA forecast report released on Tuesday.
According to sources citing figures from the American Petroleum Institute, U.S. crude stocks surged by 509,000 barrels during the week ending May 3. Additionally, gasoline and distillate fuel inventories witnessed an uptick.
Commenting on the data, analysts from ING noted, “API numbers released overnight were moderately bearish due to stock builds in both crude and products… Concern over weaker-than-usual U.S. gasoline demand and this stock-build have weighed on the prompt RBOB gasoline crack.”
Official U.S. government data on stockpiles is anticipated at 1430 GMT, with analysts polled by Reuters expecting a decline of approximately 1.1 million barrels in U.S. crude oil inventories for the previous week.
Market sentiment remained cautious regarding supply cuts from the Organization of the Petroleum Exporting Countries and its allies (OPEC+), ahead of the June 1 policy meeting.
“Oil prices have come under further pressure as noise around OPEC+ production policy grows… Expectations are that members will extend their additional voluntary supply cuts beyond the second quarter of this year,” noted ING analysts.
In parallel, hopes for a ceasefire in Gaza have exerted downward pressure on oil prices in recent sessions, with analysts suggesting a decline in the risk premium on oil.
Economist Bill Weatherburn from Capital Economics observed, “The fall in oil prices since Iran and Israel’s back-and-forth attacks suggests that some of the risk premium in prices has now unwound.”
“The U.S. believes negotiations on a Gaza ceasefire should be able to close the gaps between Israel and Hamas. U.S. Central Intelligence Agency Director Bill Burns will travel to Israel on Wednesday for talks with the Israeli Prime Minister Benjamin Netanyahu and other top officials,” a source familiar with the matter told Reuters.
Despite some analysts’ expectations that short-term demand remains robust, overall price declines have been limited.
“Much talk of economic run cuts in recent weeks is overblown in our opinion, with margins still healthy enough, which means rather that Asian demand could rather pick up once turnarounds peak and diminish,” remarked Sparta Commodities analyst Neil Crosby.