Oil prices fell over $1 on Thursday as investor concerns about oversupply rose amid a surprise build in U.S. crude oil inventories. Expectations of a potential U.S.-Iran nuclear deal further impacted the market.
As of 5:10 GMT, Brent crude futures fell $1.49, or 2.25 percent, to $64.6 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures slid $1.46, or 2.31 percent, to $61.69. This decline comes after both benchmarks lost about 0.8 percent on Wednesday.
U.S. crude stockpiles rise by 3.5 million barrels
Data from the U.S. Energy Information Administration showed crude stockpiles rose by 3.5 million barrels to 441.8 million barrels in the week ended May 9, compared with analysts’ expectations for a 1.1 million-barrel draw. This surprise rise in U.S. inventories overnight weighed on oil prices.
Analysts expect to continue seeing a range-bound market for the next month, which is likely to remain tilted downward if geopolitical tensions remain at ease.
API industry data also showed a large build of 4.3 million barrels in crude stocks last week, market sources said on Tuesday.
The Organization of the Petroleum Exporting Countries and allied producers, known as OPEC+, has also been increasing supply. However, OPEC on Wednesday trimmed its forecast for growth in oil supply from the United States and other producers outside the wider OPEC+ group this year.
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U.S.-Iran deal raises oversupply fears
Oil prices fell deeper as an Iranian official signaled, in an interview, the country’s willingness to agree to a deal with the U.S. in exchange for the lifting of economic sanctions. Expectations that a U.S.-Iran nuclear deal would ease recently tightened U.S. sanctions raised fears regarding the global crude supply-demand balance.
Saudi Arabia supported the U.S.-Iran talks and hoped for positive results, the Kingdom’s foreign minister, Prince Faisal bin Farhan Al-Saud, said on Wednesday.
Despite hopes for a deal, Washington issued fresh sanctions on Wednesday targeting Iran, following Tuesday’s sanctions on around 20 companies exporting Iranian oil to China.
A potential U.S.-Iran deal comes after the two largest economies in the world agreed on Monday to pause their ongoing trade war for at least 90 days, which was a significant step toward stabilizing relations. As part of this agreement, the United States decided to reduce tariffs on imports from China to 30 percent from a previous high of 145 percent. In response, China also made concessions by cutting duties on U.S. imports to 10 percent from 125 percent, demonstrating a willingness to alleviate tensions and foster trade.
The trade deal between the United States and China lifted market sentiment this week, reflecting broader hopes that reduced tariffs could stimulate trade flows and demand for oil, benefiting global markets.
