Oil Prices Slide as US Inventories Climb, Dollar Strengthens
Oil prices declined on Wednesday following a report showing increased crude and fuel inventories in the US, alongside a strengthening US dollar, indicating a pressured demand. Brent crude futures dropped $1.11, landing at $82.05 a barrel, while US West Texas Intermediate crude dipped $1.15 to $77.23 a barrel. The data, sourced from the American Petroleum Institute, revealed a rise of 509,000 barrels in US crude stocks for the week ending May 3.
Additional pressure came from the foreign exchange markets, where a stronger dollar made oil more expensive for non-dollar holders, impacting global trading prices. Analysts from ING noted, “API numbers released overnight were moderately bearish due to stock builds in both crude and products. … This stock build and weaker-than-usual US gasoline demand have weighed on the prompt RBOB gasoline crack.”
Market watchers are also tuning into geopolitical signals where hopes of a Gaza cease-fire could influence oil markets. The US Central Intelligence Agency Director Bill Burns is set to discuss the cease-fire with Israeli officials, including Prime Minister Benjamin Netanyahu. Analysts suggest that the easing of geopolitical tensions might reduce the risk premium on oil, contributing to the price drop.
Morgan Stanley expects strong underlying fundamentals to support Brent prices around $90 a barrel over the summer, despite potential supply adjustments from the Organization of the Petroleum Exporting Countries (OPEC+) and its allies ahead of their upcoming policy meeting.
