Oil prices edged lower on Wednesday as a large, surprise build in U.S. gasoline stocks outweighed easing supply concerns from a ceasefire deal between Israel and Hezbollah.
Brent crude futures fell 12 cents, or 0.2%, to $723.69 a barrel by 10:40 a.m. ET (1540 GMT) and U.S. West Texas Intermediate crude eased 15 cents, or 0.2%, to $68.64.
U.S. gasoline stocks rose by 3.3 million barrels in the week to 212.2 million barrels, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 46,000-barrel draw.?
Crude stocks fell by 1.8 million barrels in the week ended Nov. 22, the EIA added, compared with analysts’ expectations in a Reuters poll for a 605,000-barrel draw.
Market sources, citing the American Petroleum Institute, had said on Tuesday that oil inventories fell by 5.94 million barrels and fuel inventories rose last week.
Both benchmarks had settled lower on Tuesday after Israel agreed to a ceasefire deal with Lebanon’s Hezbollah, effective Wednesday after both sides accepted the agreement brokered by the U.S. and France.
A ceasefire between Israel and Lebanese armed group Hezbollah held on Wednesday after the two sides struck the deal, a rare feat of diplomacy in the Middle East, wracked by two wars and several proxy conflicts for over a year.
Oil prices make gains
“The real question will be for how long it (the ceasefire) will truly be honoured,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Supporting prices, sources from the OPEC+ group comprising the Organization of the Petroleum Exporting Countries and allies led by Russia have said the producer group is discussing a further delay to the oil output increase set for January.
The group, which produces about half the world’s oil, had aimed to gradually ease production cuts through 2024 and 2025, but weaker global demand and rising output outside OPEC+ have cast doubt on that plan. The decision will be made at the Dec.1 meeting.
Heads of commodities research at Goldman Sachs and Morgan Stanley said that oil prices are undervalued, citing a market deficit and risk to Iranian supply from possible sanctions under U.S. President-elect Donald Trump.
“With the President-Elect Trump’s sanctions soon to come, many think Iran will be targeted, which could slow their exports substantially,” BOK’s Kissler said.
Trump said he would impose a 25% tariff on all products coming into the U.S. from Mexico and Canada. Crude oil would not be exempt from the trade penalties, sources told Reuters on Tuesday.
Oil industry analysts and traders warned the move would likely raise oil prices for U.S. refiners, squeezing margins and driving up the cost of fuel.
“We expect WTI to trade within the range of $65-$70 a barrel, factoring in weather conditions during the Northern Hemisphere’s winter, a potential increase in shale oil and gas production under the incoming Donald Trump administration in the U.S. and demand trends in China,” said Hiroyuki Kikukawa, president of NS Trading, part of Nissan Securities.
American Dollar Exchange Rate