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Oil prices rose more than 1% on Thursday, buoyed by optimism surrounding U.S. trade negotiations and a larger-than-expected decline in U.S. crude inventories.
As of 0934 GMT, Brent crude futures gained 79 cents, or 1.15%, reaching $69.30 per barrel, while U.S. West Texas Intermediate (WTI) crude futures climbed 83 cents, or 1.3%, to $66.08 per barrel.
Factors Supporting the Rise in Oil Prices
- U.S. Trade Deal Optimism
Positive sentiment emerged from news that the EU and U.S. are reportedly moving toward a trade deal, which could include a 15% U.S. baseline tariff on EU imports with possible exemptions. This trade optimism is expected to ease global economic pressure, paving the way for further agreements and helping bolster oil prices. - U.S. Crude Inventory Drawdown
Data from the U.S. Energy Information Administration (EIA) revealed that U.S. crude inventories fell by 3.2 million barrels to 419 million barrels last week, exceeding analysts’ expectations of a 1.6 million-barrel draw. This unexpected decline in U.S. crude stocks signals tightening supply, providing additional support to oil prices.
Supply-Side Factors:
- Kazakhstan and Azeri Crude Disruptions
Supply concerns were heightened by issues in loading CPC exports from Kazakhstan due to Russian administrative interference, along with reports of contamination affecting Azeri crude loadings from Ceyhan in Turkey. These disruptions added upward pressure on prices, although their long-term impact remains uncertain. However, Kazakhstan’s energy ministry clarified that the country had not halted oil loadings via Russian sea ports, tempering some of the market’s supply concerns.
Market Outlook and Challenges
Despite the bullish data, oil prices remain constrained by broader geopolitical risks. According to Hiroyuki Kikukawa, chief strategist at Nissan Securities, uncertainty over U.S.-China trade talks and peace negotiations between Ukraine and Russia are limiting further gains. Kikukawa predicts that WTI crude will likely remain range-bound between $60 and $70 per barrel in the short term.
Demand and Refining Margins
Looking ahead, demand indicators will play a crucial role in determining the direction of oil prices. As the market enters the peak season, any changes in demand could significantly impact refining margins, which in turn would influence price movements. Investors will be watching closely for signs of either upside or downside in demand as the global market navigates the ongoing geopolitical challenges.
In summary, oil prices gained support from positive trade news and a significant inventory drawdown in the U.S., although geopolitical tensions and uncertainty about global demand continue to limit further price advances. The market’s focus now shifts to developments in the U.S.-China trade talks, the Russia-Ukraine conflict, and refining margins as the peak demand season unfolds.
