Oil steadies on surprise inventory drop, but futures still down 8% from April peak
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Oil reversed earlier declines Wednesday after new data showed US inventories fell last week, but futures are still down roughly 8% from their April peak.
On Wednesday, West Texas Intermediate (CL=F) hovered below $79 per barrel, roughly $8 off its 2024 closing high of $86.91 per barrel on April 5.
Brent (BZ=F), the international benchmark price, traded above $83 per barrel, down roughly 8% from its closing peak of $91.17 a little over a month ago.
The latest US government data released on Wednesday showed a surprise fall of 1.4 million barrels in crude oil inventories last week.
Futures had been negative going into the print after API’s storage figures Wednesday showed a larger-than-expected build.
On Tuesday, the Energy Information Administration said it sees demand for oil growing at a slower pace than earlier expectations.
The energy markets have been under pressure since April amid increased diplomatic efforts to strike a ceasefire deal between Israel and Hamas, though no agreement has been made yet.
“Headlines regarding a potential cease fire could further reduce crude prices by $3-4, but only if it signifies a genuine move to long lasting peace rather than a temporary pause in hostilities,” Rebecca Babin, US senior energy trader at CIBC Private Wealth, said in a recent note.
“However, fundamental, technical and macro headwinds indicate that it is too soon to get back on the bull. There will be an opportunity to buy the dip but our view is not to buy it just yet. Brent is likely to test $80 and WTI $75 in the short term and now would be the time to reestablish longs,” added Babin.
Oil crept higher in the first months of the year amid Houthi rebel attacks on Western cargo shipments in the Red Sea as well as Ukrainian drone attacks against Russian refineries.
Most analysts expect OPEC+ to extend its current production cuts when the oil alliance meets next month.
“Incrementally bearish fundamentals increase the probability of a full extension of OPEC+ cuts beyond Q2,” Goldman Sachs analysts said in a note this week.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.