KEY POINTS
- Oil prices rise as U.S. crude stocks show unexpected gains.
- Russia and Ukraine accuse each other of violating ceasefire terms.
- US Federal Reserve’s interest rate decision could affect oil demand.
Oil prices edged up on Wednesday, buoyed by a draw in fuel inventories in the U.S. and ongoing talks about a limited ceasefire between Russia and Ukraine.
Brent crude futures rose by 37 cents, or 0.52 percent, to $70.93 a barrel, while U.S. West Texas Intermediate (WTI) crude increased by 34 cents, or 0.51 percent, to $67.24 at 12:02 p.m. EDT (1602 GMT).
The U.S. government data released earlier on Wednesday revealed that crude stocks rose by 1.7 million barrels, reaching 437 million barrels.
The reported rise exceeded market expectations which had been set at a 512,000-barrel increase.
However, distillate inventories containing diesel and heating oil decreased by 2.8 million barrels last week while maintaining 114.8 million barrels as their total.
According to Josh Young, the chief investment officer at Bison Interests, this net draw in crude and products is viewed as incrementally bullish for oil prices.
Despite these positive figures, oil prices rise had eased slightly in the previous session following Russia’s temporary halt on attacks against Ukraine’s energy infrastructure, as proposed by U.S. President Donald Trump.
This development raised hopes for peace and the possibility of Russian oil returning to global markets.
Uncertainty surrounds ceasefire as both sides accuse each other
Despite the temporary ceasefire in place, Russia and Ukraine have already accused each other of violating the agreement.
The ceasefire, which aimed to reduce attacks on energy targets, was set in motion after a call between Trump and Russian President Vladimir Putin.
A prisoner swap did proceed as planned, but experts believe that even if a deal is fully reached, it may take time before Russian energy exports resume significantly.
Ashley Kelty, an analyst with Panmure Liberum, stated that the short-term impact would likely be the diversion of energy flows to attract better pricing.
Russia has been one of the top oil suppliers globally, but its output has dropped due to sanctions and the ongoing war in Ukraine.
The imposition of U.S. trade barriers against Canada, Mexico and China has prompted market predictions for economic contraction that would decrease crude oil market consumption.
According to Reuters, the increasing tensions in the Middle East continue to have minimal impact on expert predictions of oil price declines.
US Federal Reserve’s interest rate decision weighs on markets
A U.S. Federal Reserve interest rate announcement made later in the day might affect economic performance along with energy consumption levels.
The normal response to rate cuts is positive economic growth but Federal Reserve members seem uncertain about maintaining current rates while considering Trump’s tariff impacts on the economy.
Investors demonstrate caution due to these market factors while they wait for better indications about oil price developments.
