Oil prices edged higher on Thursday, supported by renewed optimism surrounding U.S. trade talks, which are expected to ease the strain on the global economy, along with a larger-than-anticipated drop in U.S. crude stockpiles.
Brent crude futures gained 29 cents, or 0.42 percent, to $68.8 a barrel by 4:25 GMT. Meanwhile, U.S. West Texas Intermediate crude futures climbed 33 cents, or 0.51 percent, to $65.58 per barrel.
Trade optimism drives price growth
Oil prices saw minimal movement on Wednesday as markets closely followed progress in trade discussions between the U.S. and the European Union. This came on the heels of President Donald Trump’s tariff agreement with Japan, which reduced auto import duties and exempted Japan from new tariffs in return for a $550 billion package of investments and loans directed toward the U.S.
Two European diplomats stated on Wednesday that the European Union and the United States are making progress toward a trade agreement that could feature a 15 percent baseline U.S. tariff on EU goods, with potential exemptions. This development could lay the groundwork for another significant trade deal, following the recent agreement with Japan.
Optimism over progress in tariff negotiations with the U.S. helped drive buying activity, easing fears of a worst-case scenario, said analysts. However, they noted that ongoing uncertainty surrounding U.S.-China trade discussions and peace talks between Ukraine and Russia is capping further price gains.
U.S. crude stocks dip
Further supporting oil prices, U.S. Energy Information Administration data recently showed that U.S. crude inventories fell last week by 3.2 million barrels to 419 million barrels, exceeding analysts’ expectations for a 1.6 million-barrel draw. The larger-than-expected decline in crude stocks signals stronger demand.
The data also revealed that gasoline stocks fell by 1.7 million barrels to 231.1 million barrels, nearly double the expectations for a 908,000-barrel draw. However, distillate stockpiles rose by 2.9 million barrels in the week to 109.9 million barrels but remained near their lowest seasonal level since 1996.
Read| The invisible edge: Why trading infrastructure now matters more than ever
Geopolitical tensions in focus
On Wednesday, Russia and Ukraine held peace talks in Istanbul, focusing on additional prisoner exchanges. However, the two sides remain deeply divided over ceasefire conditions and the prospects of a meeting between their leaders.
The U.S. energy secretary said on Tuesday that the U.S. is considering sanctions on Russian oil to help bring an end to the war. Meanwhile, the European Union approved its 18th sanctions package against Russia on Friday, which includes a lower price cap on Russian oil.
