Oil Prices Decline Amid Middle East Ceasefire Hopes and Growing US Inventories
Hopes for Ceasefire in the Middle East
Oil prices experienced a more than 1% decline on Wednesday, marking their third consecutive session of losses. The drop was attributed to growing expectations of a ceasefire agreement between Israel and Hamas in the Middle East. Renewed efforts led by Egypt raised hopes for a resolution, although Israeli Prime Minister Benjamin Netanyahu remained firm on carrying out an assault on Rafah.
Brent and WTI Futures Fall
Brent crude futures for July saw a decline of $1.48, equivalent to 1.7%, settling at $84.85 per barrel by 0928 GMT. This marked the lowest level since March 15. Similarly, U.S. West Texas Intermediate (WTI) crude futures for June dropped by $1.49, or 1.8%, reaching $80.44, the lowest since March 22. The ongoing optimism about a potential ceasefire contributed to the downward pressure on crude prices, as noted by Ole Hansen from Saxo Bank.
US Federal Reserve Meeting and Interest Rates:
The conclusion of the latest two-day policy meeting by the U.S. Federal Reserve also influenced market sentiment. It was widely anticipated that the Fed would maintain interest rates at their current level. A rate cut could stimulate economic growth and subsequently drive up demand for oil. However, persistent signs of inflation have tempered expectations for such a move.
Concerns Over US Crude Inventories:
Reports of increased crude inventories and production in the United States added further pressure on oil prices. According to data from the American Petroleum Institute (API), U.S. crude inventories unexpectedly rose by 4.906 million barrels in the week ending April 26, contrary to expectations of a 1.1 million barrel decline. Traders are awaiting official confirmation from the Energy Information Administration (EIA) to confirm this trend. Additionally, the EIA reported that U.S. production surged to 13.15 million barrels per day in February, marking its largest monthly increase in about 3-1/2 years.
