Black gold prices fell further after data from the American Petroleum Institute showed a jump in US crude oil and fuel inventories last week. Rising inventories, typically a sign of weak demand, have defied analysts’ expectations in recent weeks. The U.S. Department of Energy announced a bid to buy 3.3 million barrels of crude oil during Friday’s session to help replenish strategic oil stocks. According to a report by the Energy Information Administration, the oil market has tightened due to global inventories, which have fallen by 300,000 barrels a day this year, thanks to OPEC+ complying with oil production curbs.
There remains considerable uncertainty due to the wars in the Middle East and the development of this black gold, which the EIA believes could translate into a sharp rise in oil prices in the medium term. Israeli Prime Minister Benjamin Netanyahu said last week that the ceasefire proposal accepted by Hamas was intended to sabotage the entry of Israeli forces into Rafah and was far from Israel’s fundamental demands, according to the Times of Israel. This year’s brief rise in oil prices has raised geopolitical risk in the Middle East, where there has been no major disruption to oil supplies.
The CEO of Chevron Co. Mike Wirth said prices have remained in a relatively stable range, but risk to oil remains due to the proximity of the war at the Strait of Hormuz, the most important global transit point for oil. Currently, according to CNBC analysts, a lot depends on the course of events, where everyone hopes for an end to the conflict. According to (The Energy Information Administration’s) EIA, OPEC+ currently has 4 million barrels of spare oil capacity that could be used to deal with any short-term supply disruption.
The Israeli delegation said in a statement from Netanyahu’s office that it would continue ceasefire talks in Cairo «to eliminate negative arguments to reach an agreement with Israel’s conditions.» Analyst Tamas Varga told CNBC: » A ceasefire in the seven-month war remains out of sight. It’s unclear whether a ceasefire would stop attacks by Houthi militants on Red Sea shipping, which is still the biggest risk to oil supplies by sea.»
Light US WTI and Brent crude are down around 7% in price from their April highs, when traders raised prices on concerns that Israel and Iran are on the brink of war. Brent crude oil was trading around $83.50 per barrel on May 13, 2024, and light US WTI crude was trading around $79.00 per barrel.
According to an analysis by energy brokerage StoneX, the latest global inventory data shows that oil stocks are 1.1 million barrels per day higher than forecasts in developed economies. Last week, Brent and WTI posted their steepest weekly losses in three months as the release of weak U.S. jobs data raised hopes of an interest rate cut. Due to this and a possible interest rate cut in the US, Reuters analysts are forecasting a decline in US crude oil and fuel inventories.