In the latest trading session, oil prices experienced a further decline as new industry data revealed an unexpected increase in U.S. crude inventories. This surprising stockpile growth, coupled with ongoing apprehension about high U.S. interest rates, has led to a subdued market atmosphere.
The price of Brent oil futures for July delivery fell by 0.6% to $82.40 a barrel, while West Texas Intermediate (WTI) crude futures dropped 0.7% to $78.13 a barrel. This downturn marks the fourth consecutive session of losses, driven by concerns over weakening demand and reduced geopolitical tensions in the Middle East. Additionally, less optimistic projections for China’s economic recovery are casting a shadow over the oil market’s prospects.
According to the American Petroleum Institute (API), U.S. oil inventories unexpectedly increased by 2.5 million barrels in the week ending May 17, contrary to the anticipated draw of 3.1 million barrels. Furthermore, gasoline stockpiles expanded by 2.1 million barrels, although distillate inventories decreased by 320,000 barrels.
This inventory build-up suggests a slowdown in U.S. oil demand, particularly in fuel consumption. However, with the Memorial Day holiday approaching—signaling the start of the summer travel season—fuel demand is expected to rise in the near term.
Despite this, the persistent threat of high inflation and interest rates continues to cloud market sentiment. Recent comments from Federal Reserve officials suggest that the central bank requires greater assurance of decreasing inflation before considering rate cuts. Investors are keenly awaiting the minutes from the Fed’s late-April meeting, expected later today, for further insights into future monetary policies.
The strength of the dollar ahead of these minutes also plays a role in suppressing oil prices. Meanwhile, all eyes are on the upcoming OPEC+ meeting in early June, where decisions on extending production cuts will be critical for future market direction.
