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Oil prices made modest gains in Asian trade on Thursday, boosted by a larger-than-expected draw in U.S. oil inventories, which sparked some optimism around demand. However, the potential for further increases remained tempered by the sustained ceasefire between Israel and Iran, which has reduced concerns over potential disruptions in Middle Eastern oil supplies.
The uptick in oil prices also benefited from the continued weakness of the U.S. dollar. The greenback hit fresh losses following reports that President Donald Trump plans to announce the successor to Federal Reserve Chair Jerome Powell earlier than anticipated, a move that may stir expectations of future interest rate cuts.
Brent oil futures rose 0.4% to $67.93 per barrel, while U.S. West Texas Intermediate (WTI) crude futures gained 0.5% to $63.76 a barrel as of 21:17 ET (01:17 GMT).
U.S. Inventories Show Strong Demand
Government data revealed on Wednesday that U.S. oil inventories declined by 5.8 million barrels (mb) in the week ending June 20, far surpassing the expected 1.2 mb draw. This report follows the previous week’s outsized 11.5 mb draw and showed sharp decreases in both distillates and gasoline inventories.
The data signaled that demand in the U.S., the world’s largest fuel consumer, remains strong, driven in part by the upcoming travel-heavy summer season. This helped ease concerns that U.S. fuel demand was slowing due to weaker consumer spending and growing uncertainty about the impacts of Trump’s trade tariffs, although these challenges are expected to persist in the coming months.
The Ceasefire in Focus
Despite the positive data from the U.S. inventories, oil prices have experienced significant losses this week, partly due to the diminishing risk of supply disruptions after the Israel-Iran ceasefire was announced on Monday. The truce, which came into effect early Tuesday, has eased concerns over the potential for major disruptions in Middle Eastern oil flows.
Moreover, Trump refrained from imposing additional sanctions on Iran’s oil industry following the recent conflict, and instead, suggested that easing sanctions to help Iran rebuild might be on the table. This signal, combined with the continuation of nuclear talks with Washington scheduled for next week, has further reassured the market about the stability of oil supplies from the region.
Importantly, Iran has not followed through with threats to block the Strait of Hormuz, a crucial shipping lane for oil exports, as previously feared. This decision has meant that oil shipments to Europe and Asia have remained relatively unaffected by the geopolitical tensions.
In conclusion, while the oil market faces pressure from the ongoing ceasefire and potential stabilization in the Middle East, the strong U.S. demand data offers some positive support, even as concerns around trade and tariffs continue to loom.
