Oil Prices Dip Slightly Amid U.S. Inventory Rise and Middle East Tensions

Oil prices experienced a slight decline on Wednesday due to data indicating a significant increase in U.S. crude inventories. Brent crude futures fell by 20 cents to settle at $75.84 per barrel, while U.S. West Texas Intermediate (WTI) crude futures also dropped by 20 cents to $71.54 per barrel. This decrease followed a rise in crude futures over the last two sessions. Analysts from ING highlighted that the strength in prices on Tuesday might have been influenced by the ongoing situation in the Middle East, particularly the lack of a clear outcome from U.S. Secretary of State Antony Blinken's recent meetings in Israel. Blinken engaged in "long discussions" with Israeli Prime Minister Benjamin Netanyahu focusing on increasing humanitarian aid to Gaza, as noted by a senior State Department official.

In related developments, Israel confirmed the death of Hashem Safieddin, a senior figure in Hezbollah, indicating ongoing conflict in the region. IG market strategist Yeap Jun Rong noted that the market is factoring in the potential for further escalation of the Middle East conflict and that a potential ceasefire may face challenges. Additionally, Yeap suggested that recent stimulus efforts in China could stabilize conditions or even trigger a recovery, which would positively impact oil demand.

According to the American Petroleum Institute, the rise in U.S. crude inventories by 1.64 million barrels last week exerted pressure on oil prices. This increase surpassed analysts' expectations of a 300,000-barrel rise. Official U.S. government oil inventory data is expected to be released later today. Goldman Sachs projected that, given a moderate crude surplus among OPEC+ producers and existing spare capacity, oil prices will average $76 per barrel in 2025. OPEC+ includes the Organization of the Petroleum Exporting Countries and allies such as Russia.