Crude oil prices found a tentative footing on Thursday, attempting to stabilize after a period of decline.
The downward pressure stemmed from a concerning build in US stockpiles, which amplified existing worries about an oversupplied market, compounded by a broader easing in global financial markets.
Brent crude, the international benchmark, hovered near the $65 a barrel mark, having shed approximately 1% over the preceding two trading sessions.
West Texas Intermediate (WTI), the US benchmark, traded below $62 a barrel.
The latest data revealed that US commercial inventories of crude oil rose for a second consecutive week.
Adding to the bearish sentiment, gauges measuring demand for both gasoline and distillates also appeared weak, a particularly concerning sign as the US summer driving season—typically a period of peak consumption—approaches.
This weakness in the oil complex was mirrored in broader financial markets.
Growing concerns about Washington’s ballooning budget deficit triggered declines in US stocks, government bonds, and the US dollar.
This risk-off sentiment subsequently rippled through Asian equity markets, which followed their US counterparts lower.
These market ructions are occurring at a time when global investor appetite for US assets was already showing signs of waning.
Supply glut and trade war jitters persist
Crude oil remains under significant pressure as the Organization of the Petroleum Exporting Countries (OPEC) and its allies (collectively known as OPEC+) gradually reintroduce barrels into a market that already appears well-supplied.
This supply dynamic has contributed to oil futures being approximately 13% lower year-to-date.
Furthermore, the ongoing US-led trade war has exacerbated losses, fueling concerns that the globe-spanning disruptions will inevitably slow economic growth, thereby hurting energy demand.
Geopolitical chessboard: Iran, Ukraine in focus
Despite the prevailing supply and demand concerns, geopolitical factors continue to play a crucial role in shaping market sentiment.
Ongoing nuclear talks between the United States and Iran remain a key variable, as any resolution could significantly alter global oil flows.
Adding to regional tensions, a report emerged this week suggesting that Israel was preparing for a potential strike on Tehran.
Separately, investors are closely monitoring the long-running efforts to broker an end to the war in Ukraine.
Developments on either of these fronts could lead to shifts in sanctions policies and materially impact global oil balances.
In a related development concerning Ukraine, the United Kingdom urged its Group of Seven (G7) allies to lower the price cap imposed on Russian oil.
Following a finance ministers’ meeting in Banff, Canada, the UK stated that such a move was necessary to exert further pressure on Russian President Vladimir Putin to end Moscow’s ongoing assault.
Market analysts acknowledge the fleeting impact of some geopolitical headlines unless they translate into immediate supply disruptions.
“Israel-Iran headlines offered a fleeting geopolitical premium, but these tend to fade quickly unless supply disruptions are imminent,” commented Charu Chanana, chief investment strategist at Saxo Markets Pte.
She also highlighted the broader market context, noting, “US fiscal concerns are adding to the risk-off tone,” which is limiting the scope for any significant rally in oil prices.
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