Increased US Inventories Lead to Decline in Oil Prices
Oil prices experienced a decline on Thursday due to an unexpected increase in US
Oil prices experienced a decline on Thursday due to an unexpected increase in US stockpiles, which raised concerns about reduced demand from the world’s largest oil consumer. However, these losses were tempered by apprehensions that further escalation of the Gaza conflict might disrupt oil supplies from the Middle East.
Brent crude oil futures fell by 28 cents, or 0.3%, to reach $84.97 per barrel by 0310 GMT. Similarly, US West Texas Intermediate crude futures dropped by 31 cents, or 0.4%, to $80.59 per barrel.
Both benchmarks had seen marginal gains on Wednesday.
According to Tsuyoshi Ueno, senior economist at NLI Research Institute, “The market is currently facing downward pressure from anticipated increases in US crude oil and gasoline inventories, reflecting concerns over weakening demand.” However, he noted that the market remains balanced by fears that heightened tensions between Israel and Hezbollah could disrupt oil supply.
The US Energy Information Administration (EIA) reported a surprise increase of 3.6 million barrels in the country’s crude oil stocks last week, contrary to expectations of a 2.9 million-barrel decrease among analysts surveyed by Reuters.
Additionally, US gasoline stocks climbed by 2.7 million barrels, surpassing analysts’ projections of a 1 million-barrel reduction. Demand for motor gasoline, a key indicator, dropped by approximately 417,000 barrels per day last week to 8.97 million bpd. Compared to last year, the four-week average demand is about 2% lower.
Emril Jamil, senior analyst at LSEG Oil Research, commented, “Despite the onset of peak summer driving season, weak US gasoline demand limits upside potential for the market.” He highlighted that gasoline margins have declined since March, along with sluggish diesel demand in Europe and the US since August last year.
Meanwhile, concerns persisted over the Gaza conflict spreading to Lebanon, which helped mitigate the decline in oil prices. Tensions have escalated between Israel and Hezbollah, raising fears of a broader conflict involving major regional powers such as Iran.
Turkish President Tayyip Erdogan expressed solidarity with Lebanon and called for support from neighboring regional countries. In Gaza, Israeli forces conducted extensive airstrikes on Wednesday, with reports of intense overnight clashes in Rafah in southern Gaza.
