Oil Prices Dip as Traders Brace for Jump in U.S. Crude Inventories

SINGAPORE: Oil prices edged lower on Wednesday as traders anticipated a significant rise in U.S. crude stockpiles, even as prices hovered near two-week highs driven by renewed optimism over easing trade tensions between the U.S. and China. Brent crude futures dropped 39 cents, or 0.6  per cent, to $66.24 per barrel by 0400 GMT, while U.S. West Texas Intermediate (WTI) crude fell 36 cents, or 0.6  per cent, to $63.31. Both benchmarks had surged more than 2.5  per cent in the previous session.

The decline came after the U.S. and China agreed to a 90-day truce in their prolonged trade war, with Washington reducing tariffs from 145  per cent to 30  per cent and Beijing lowering duties on U.S. goods from 125 per cent to 10 per cent. “The U.S.-China economic pause might have crafted a narrative that could invigorate demand amidst a backdrop of cautious optimism,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. However, she warned that the potential for a sharp rise in U.S. oil inventories could weigh on sentiment. “This stark contrast to last week’s substantial draw suggests that demand is still under pressure, keeping traders on edge,” she added.

According to market sources citing the American Petroleum Institute, U.S. crude stocks rose by 4.3 million barrels for the week ending May 9. The official inventory data from the U.S. Energy Information Administration is expected later on Wednesday at 10:30 a.m. EDT (1430 GMT). Analysts at Rystad Energy noted that the temporary trade truce had slightly lifted market sentiment, though they warned that the broader impact of lingering tariffs could still dampen long-term demand.

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Markets are also closely monitoring U.S. President Donald Trump’s trip to the Gulf, which began Tuesday with his participation in an investment forum in Riyadh. During the event, Trump announced the lifting of longstanding sanctions on Syria and secured a \$600-billion Saudi investment commitment. Mukesh Sahdev, global head of commodity markets at Rystad Energy, said one of Trump’s key goals during the trip is to prevent a surge in oil prices during the peak summer travel season. He added that the U.S. might use the opportunity to bolster its Strategic Petroleum Reserve by purchasing cheaper Middle Eastern crude.

Meanwhile, geopolitical tensions remain a factor. On Tuesday, the U.S. imposed new sanctions on about 20 companies allegedly assisting Iran’s Armed Forces General Staff and its front company, Sepehr Energy, in transporting Iranian oil to China. The sanctions came amid the fourth round of indirect U.S.-Iran talks in Oman aimed at resolving disputes over Iran’s nuclear program. As markets juggle supply uncertainties and evolving geopolitical dynamics, all eyes remain on upcoming inventory data and further developments in U.S. foreign policy.