The crude oil prices edged higher on Wednesday as the data from the American Petroleum Institute revealed a decline in the US oil inventories last week, helping the asset rise from 2-month lows. The Brent crude gained to $73.00 while WTI climbed to $69.00 at the time of writing.
The API reported a decline of 640k barrels in the US crude inventories for the week ending 21st Feb. If EIA confirms the data later today, this would be the first decline since 15th January. Meanwhile, market participants were expecting a build-up of 2.6 million barrels. Hence, this report was a surprise for the bulls.
Oil markets are also digesting the ongoing political shift, including the Russia-Ukraine peace deal, which is near completion. The agreement could lead to the lifting of the ban on Russian oil exports, potentially replacing the shadow fleet system with increased transparency. This could ease the pressure on global supply, reducing premiums that previously supported the oil prices.
Simultaneously, the US-Ukraine mineral deals are also a point of attention that may further shape the market outlook. These developments could eliminate the Russian-exports-centric uncertainties and result in a long-term bearish case for oil prices.
Though the inventory draw lent decent support, the broader economic concerns continue to weigh on the crude oil markets. A steeper drop in US consumer confidence to 10-month lows of 98.3 has raised fresh concerns about US economic growth, inflationary pressure and tariff risks. Moreover, the German economy also showed a contraction in Q4 of 2024, adding more fuel to the recession fears.
President Trump’s energy policies may also prove to be detrimental to oil buyers. His administration is expected to expand the oil supply to keep prices lower, which aligns with the market sentiment and points to a weaker outlook for oil in 2025.
With a mix of economic data, shifting geopolitics, and changing energy policies, oil markets experience uncertainty. Traders will closely watch the Fed speeches, US Q4 GDP, and Core PCE Index data to find further directional bias.
