Markets

Oil prices stabilize after two-day decline amid significant drop in US crude inventories

Brent crude climbed above $73 per barrel, recovering from a 1.8% decline over the previous two sessions, while West Texas Intermediate edged closer to the $70 mark.

Oil prices stabilize after two-day decline amid significant drop in US crude inventories

Oil prices steadied following a two-day slide, buoyed by an industry report signaling a substantial reduction in U.S. commercial crude stockpiles.

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Oil prices steadied following a two-day slide, buoyed by an industry report signaling a substantial reduction in U.S. commercial crude stockpiles.

Brent crude climbed above $73 per barrel, recovering from a 1.8% decline over the previous two sessions, while West Texas Intermediate (WTI) edged closer to the $70 mark.

According to the American Petroleum Institute, U.S. crude inventories fell by 4.7 million barrels last week. If confirmed by official data expected later on Wednesday, this would mark the fourth consecutive weekly drop.

Crude market remains in a narrow band

For the past two months, crude prices have fluctuated within a narrow range, shaped by ongoing geopolitical tensions in the Middle East and Europe and the U.S. threat of further sanctions on oil supplies from Iran and Russia.

However, price pressures have been tempered by lackluster Chinese demand and robust production forecasts from non-OPEC+ producers, particularly the U.S., where the incoming administration has promised to bolster domestic energy output.

Markets brace for Trump’s energy policies

“Markets will tread cautiously as they assess how swiftly Donald Trump will issue executive orders on drilling and the speed at which this could translate into increased U.S. crude output,” Robert Rennie, Head of Commodities and Carbon Research at Westpac Banking Corp told Bloomberg.

“For now, prices are expected to hover within the $70-$75 trading range. However, an upward trajectory in the first quarter is conceivable, supported by OPEC+’s extension of production cuts," he added.

Sanctions on Iran and Russia tighten market

Sanctions targeting Iran and Russia remain a focal point. The U.K. has unveiled fresh restrictions aimed at disrupting key enablers of Russia’s oil trade, alongside penalties on additional vessels in Russia’s so-called shadow fleet.

These measures follow the European Union's recent sanctions on over 50 ships involved in transporting Russian crude.

With heightened geopolitical moves and evolving energy policies, the crude market faces a delicate balancing act heading into 2024.

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