Oil prices experienced minimal movement on Thursday, following U.S. inventory data that presented a mixed outlook on supplies, while easing tensions in the Middle East reduced oil’s risk premium.
Crude prices have been under pressure this week after Israel and Lebanon reached a ceasefire agreement. However, Israel continued its military actions in Gaza, dampening hopes for greater stability in the region.
A weaker dollar helped to mitigate overall losses in oil prices, while ongoing tensions between Russia and Ukraine kept some risk factors in play. By 20:31 ET (01:31 GMT), January Brent oil futures dipped 0.1 percent to $72.78 a barrel, while West Texas Intermediate crude futures held steady at $68.33 a barrel.
U.S. oil inventories decline, gasoline stockpiles increase
According to government data released on Wednesday, U.S. oil inventories fell by 1.8 million barrels during the week ending November 22. In contrast, gasoline inventories increased by 3.3 million barrels, marking the second consecutive week of significant builds, while distillate stocks also grew. These inventory increases raised concerns that demand may be slowing in the U.S., the world’s largest fuel consumer, particularly as the winter season approaches, which typically reduces travel.
The oil markets remain cautious about a potential global supply surplus in 2025, primarily driven by record-high production levels in the U.S. Nevertheless, the dollar’s weakness helped to limit larger losses in crude, especially as traders maintained expectations for a 25 basis point interest rate cut from the Federal Reserve in December.
Anticipation for OPEC+ meeting
Attention in the oil markets is now shifting to the imminent meeting of the Organization of Petroleum Exporting Countries and its allies (OPEC+). Scheduled for December 1, reports suggest that the group may further delay plans to increase production, amid worries about slowing demand and high supplies from non-OPEC countries.
China remains a significant concern for OPEC, as the largest oil importer faces challenges with a sluggish economic recovery and limited stimulus measures. The geopolitical landscape for China is also uncertain, particularly with the prospect of increased U.S. trade tariffs under a potential Trump administration, which has promised to boost U.S. energy production.
Recent price movements and market reactions
Oil prices fell slightly on Wednesday, extending recent declines after Israel’s agreement to a ceasefire with Lebanon reduced the perceived risk premium for crude. However, losses were constrained by industry data indicating an unexpected and substantial reduction in U.S. oil inventories, which fueled speculation about tighter supply conditions.
By 20:47 ET (01:47 GMT), Brent oil futures for January delivery decreased by 0.2 percent to $72.70 a barrel, while West Texas Intermediate (WTI) crude futures also fell 0.2 percent to $68.30 a barrel. The downturn in oil prices was further limited by a Reuters report suggesting that OPEC+ was contemplating a delay in their plans to increase production.
U.S. oil inventory data
Data from the American Petroleum Institute (API) released on Tuesday revealed an unexpected drop in U.S. oil inventories, which fell by nearly 6 million barrels for the week ending November 22. Analysts had forecast a rise of 0.25 million barrels following a significant build of 4.75 million barrels the week prior. This surprising decrease bolstered optimism regarding robust U.S. fuel demand, potentially tightening oil supplies in the coming months. The API’s report often precedes a similar government report expected later on Wednesday.
In the past two trading sessions, oil prices have declined following initial media reports of a potential ceasefire between Israel and Lebanon. This agreement represents a de-escalation in the Middle East conflict after 13 months of intense fighting, although tensions between Israel and Hamas in Gaza are likely to persist. Despite this, oil prices still retained some risk premium due to the ongoing escalation in the Russia-Ukraine conflict, raising concerns about possible disruptions to Moscow’s crude output.
