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Oil prices settle higher even as US stockpiles fall less than expected

Published 05/07/2024, 10:06 PM
Updated 05/08/2024, 03:21 PM
© Reuters.

Investing.com -- Oil prices settled higher Wednesday even as U.S. oil supplies fell for less than expected, though signs of a pick up in refining activity ahead of the U.S. summer driving season boosted sentiment.

At 14:30 ET (19:30 GMT), Brent oil futures rose 0.5% to $83.58 a barrel, while West Texas Intermediate crude futures rose 0.8% to settle at $78.99 a barrel.

US oil inventories fall less than expected

U.S. oil inventories fell by 1.36 million barrels last week barrels in the week to May 2, less than the expected 1.43M barrels expected, but the decline followed data earlier showing an unexpected build in crude stockpiles.

The draw in crude stockpiles was supported by uptick in refining activity  as the summer driving season - a gasoline hungry period during which Americans hit the road around the Memorial Day weekend through Labor Day --  fast approaches. 

Strong U.S. supplies have undermined expectations of tighter global oil markets, especially as recent data also showed U.S. oil production raced back to record highs in February. 

Gasoline inventories unexpectedly rose by 915,00 barrels, compared with forecast for a draw of 1.2M barrels 

OPEC+ to roll over supply output cuts? 

Cautious expectations on supply cuts from the Organization of the Petroleum Exporting Countries and its allies ahead of a June 1 policy meeting also weighed on markets.

Russian Deputy Prime Minister Alexander Novak said on Tuesday that there had been no discussions about an oil output increase by OPEC+, a day after he was reported saying the group had the option of increasing production.

"Our oil balance suggests that there is no need for a full rollover of the 2.2m b/d of cuts. Instead, a partial rollover should be enough to keep the market balanced for the remainder of the year," ING added. "However, recent price action increases the risk that full cuts are rolled over, which in turn increases the risk of OPEC+ overtightening the oil market later in the year."

Middle East tensions persist, Israel-Hamas ceasefire uncertain 

Israel kept up its offensive against Rafah on Tuesday, while also seizing a key main border crossing in the city. 

The move came even as Hamas officials reportedly accepted a new ceasefire proposal for Gaza - one that Israel rejected. Hamas also expressed ire over Israel’s attacks on Rafah, and that the strikes largely undermined any progress towards a truce.

Still, U.S. officials said a ceasefire could still be reached, as delegates from both sides met in Cairo for negotiations.

The prospect of continued geopolitical unrest in the Middle East presented some support to oil prices, amid bets that the unrest will disrupt supplies in the oil-rich region.

(Peter Nurse, Ambar Warrick contributed to this article.)

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