Oil Prices Dip Amid Surprise Surge in US Inventories

Oil prices saw a slight decline on Wednesday, as a surprise increase in U.S. fuel inventories overshadowed signs of rising demand. The news also coincided with growing concerns over broader economic impacts from U.S. tariffs, which continued to weigh on the markets.

Brent crude closed down by 19 cents, or 0.3%, at $68.52 per barrel. Meanwhile, West Texas Intermediate (WTI) crude dropped 14 cents, or 0.2%, ending the day at $66.38 per barrel.

Latest Oil Prices:

WTI Crude  $66.62 +0.10 +0.15%

Brent Crude $68.69 -0.02 -0.03%

Murban Crude $69.93 -0.17 -0.24%

Louisiana Light  $70.89 -1.54 -2.13%

Bonny Light $78.62 -2.30 -2.84%

Mars US $71.88 -1.03 -1.41%

Gasoline $2.153 -0.017 -0.78%

Natural Gas $3.565 +0.042 +1.19%

Despite the ongoing expectations for increased demand, the unexpected inventory rise sent a ripple through the oil markets. According to the Energy Information Administration (EIA), U.S. gasoline stocks surged by 3.4 million barrels last week, while market analysts had forecast a decrease of 1 million barrels.

The data further showed that distillate inventories, which include diesel and heating oil, jumped by 4.2 million barrels—vastly surpassing expectations of a mere 200,000 barrel increase. These figures are notable, as they could signal an oversupply in the short-term, affecting global oil prices.

Conversely, commercial crude oil stocks fell by 3.9 million barrels to 422.2 million barrels, a larger drawdown than the forecasted 552,000 barrel reduction. This drop in crude reserves could signal stronger demand or more effective supply chain management, balancing out some of the negative signals from the fuel inventories.

Geopolitical Tensions and Trade Concerns Loom

Amid these market shifts, the broader geopolitical climate remains a significant influence on oil prices. The threat of escalating trade wars, particularly from U.S. President Donald Trump’s policies, continues to cloud market forecasts. Trump recently warned of imposing heavy tariffs on Russia in the coming 50 days unless a resolution to the ongoing Ukraine conflict is reached, adding to investor uncertainty.

Additionally, the European Commission is preparing for potential countermeasures should talks with Washington fail. These tensions have raised concerns about possible disruptions in global trade, which could further strain energy markets.

In the U.S., reports that President Trump might seek to remove Federal Reserve Chairman Jerome Powell led to a sharp rise in short-term U.S. interest rate futures, prompting investors to bet on potential rate cuts beginning as soon as September.

Looking forward, the Organization of the Petroleum Exporting Countries (OPEC) in its latest monthly report projected that the global economy would improve in the second half of the year, driven by stronger growth in China, India, and Brazil, alongside recovery in the U.S. and the European Union.

In China, state-run refineries ramped up production after completing maintenance, responding to surging demand in the third quarter. Barclays estimates that China’s demand for oil grew by 400,000 barrels per day in the first half of the year, reaching 17.2 million barrels per day.

However, the oil market faces ongoing disruptions from geopolitical tensions in the Middle East. Drone attacks on oil fields in Iraq’s Kurdistan region, now continuing for the third consecutive day, have caused a loss in production of approximately 140,000 to 150,000 barrels per day. This supply shortfall, along with other regional instability, continues to impact the overall balance of supply and demand.