Oil prices saw a rise of over 1 percent on Wednesday, bouncing back from a significant drop earlier in the week. This uptick comes as new data indicated strong demand for oil in the United States, along with ongoing concerns about the fragile ceasefire between Iran and Israel.
Brent crude futures increased by 82 cents, reaching $67.96 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 83 cents to $65.20. Earlier this week, both Brent and WTI had hit their lowest prices since early June.
The market reacted positively to data from the Energy Information Administration (EIA), which reported a decline in U.S. crude, gasoline, and distillate inventories. Specifically, crude oil inventories dropped by 5.8 million barrels, bringing the total down to 415.1 million barrels. Analysts had expected a smaller decrease of 797,000 barrels, making the actual drop more significant.
Phil Flynn, a senior analyst at the Price Futures Group, noted that this report highlights strong U.S. supply and demand, shifting focus away from geopolitical tensions. Additionally, market expectations that the Federal Reserve might cut interest rates soon are contributing to the positive outlook. Lower interest rates typically encourage economic growth and increase demand for oil.
OANDA senior market analyst Kelvin Wong mentioned that recent comments from Fed Chair Jerome Powell suggested a potential interest rate cut could come as early as July. This has led to optimism that oil prices could stabilize due to increased demand.
Despite the rise in oil prices, there are still concerns about the ongoing conflict in the Middle East. President Donald Trump remarked that while Israel and Iran may be weary of fighting, the potential for renewed conflict remains. He indicated that he has not abandoned his strategy of imposing sanctions on buyers of Iranian oil.
A preliminary U.S. intelligence report indicated that recent airstrikes had not completely neutralized Iran’s nuclear capabilities, but had only delayed them. A ceasefire brokered by Trump appears to be holding for now, with both Iran and Israel indicating that their recent airstrikes have ceased.
As the situation develops, analysts expect oil prices to stabilize between $65 and $70 per barrel. Traders will be keeping a close eye on upcoming U.S. economic data and the Federal Reserve’s decisions in the coming weeks.