Oil Prices Edge Up as US Inventory Draw Signals Robust Demand

Oil prices are inching higher today, extending the gains seen on Wednesday, as a larger-than-expected draw in U.S. crude stocks suggests firm demand in the world's largest economy. However, investors remain cautious, closely monitoring the fragile Iran-Israel ceasefire and broader stability in the Middle East.

Brent crude futures rose by 12 cents, or 0.2%, to $67.80 a barrel by 0030 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude gained 20 cents, or 0.3%, reaching $65.12. Both benchmarks had climbed nearly 1% on Wednesday, recovering from earlier losses in the week, following data indicating resilient U.S. demand.

"Some buyers are favoring solid demand indicated by falling inventories in U.S. weekly statistics," noted Yuki Takashima, an economist at Nomura Securities. He added, "But investors remain nervous, seeking clarity on the status of the Iran-Israel ceasefire," emphasizing that market attention is now shifting towards OPEC+ production levels. Takashima forecasts that WTI will likely return to the $60-$65 range, its pre-conflict levels, if current trends hold.

The latest data from the Energy Information Administration (EIA) on Wednesday showed a significant decline in U.S. crude oil and fuel inventories last week. Crude inventories fell by a substantial 5.8 million barrels in the week ending June 20, far exceeding analysts' expectations for a mere 797,000-barrel draw in a Reuters poll. This larger-than-anticipated drop points to robust refining activity and strong consumer demand.

Adding to the bullish inventory picture, gasoline stocks unexpectedly decreased by 2.1 million barrels, contrary to forecasts for a build. This was driven by a surge in gasoline supplied – a proxy for demand – which reached its highest level since December 2021.

Geopolitical factors continue to weave a complex narrative for oil markets. US President Donald Trump lauded the "swift end" to the conflict between Iran and Israel, stating that Washington would likely seek a commitment from Tehran to end its nuclear ambitions at talks with Iranian officials next week. However, Trump also affirmed that the U.S. has not abandoned its "maximum pressure" campaign on Iran, including restrictions on Iranian oil sales, while simultaneously signaling a potential easing in enforcement to aid the country's rebuilding efforts. These mixed signals from the US administration introduce an element of uncertainty regarding future Iranian oil supply.

Meanwhile, Igor Sechin, head of Russia's largest oil producer Rosneft, indicated on Saturday that OPEC+ might bring forward its planned output hikes by approximately a year from its initial schedule. This potential acceleration of supply could also influence future oil price movements.

Overall, the market is currently balancing strong demand signals from the U.S. with ongoing geopolitical cautiousness and the evolving dynamics of OPEC+ production policy.