Oil prices increased in the global commodities market yesterday after data showed that U.S inventories fell sharply. The market expect demand to increase in US as weak dollar reduce energy costs amid success recorded at Middle East peace talk.
Brent crude rose to $72.49 per barrel while the US benchmark West Texas Intermediate also increased to $68.83 per barrel in the market yesterday. Data from the American Petroleum Institute ,API, showed a larger-than-expected drop in US crude oil stocks which supported the upward movement in prices.
API reported a decrease of 5.93 million barrels in US commercial crude inventories last week, contrary to market expectations of a 250,000 barrel increase, fostering optimism regarding rising demand in the US.
The US Energy Information Administration is set to release its official inventory report during the day. Also, the weakening of the US dollar against other currencies aided the rise in oil prices.
The US dollar index, which measures the US dollar’s value against other currencies, fell 0.15% to 106.809. The weak dollar is expected to enhance demand by making oil cheaper for those who use foreign currencies.
Brent has been trading flat after a sharp fall on Monday as the market assesses the Middle East’s new dynamics, ING says. Israel and Hezbollah have announced a 60-day ceasefire agreement, effective immediately. This time window could be used to discuss a longer-lasting peace agreement.
The focus now shifts to the implementation of the current agreement and how it affects ongoing fighting in the Gaza Strip or the Israel-Iran conflict. OPEC+ is scheduled to meet this weekend and expectations are that the group could further delay its plans to increase production by 180k bbls/d in January.
In the last meeting, the group had postponed its supply increment plans from December to January. Crude oil prices continue to face stiff resistance around US$75/bbl due to demand concerns. Any premature production hike from the group could push the market into deeper oversupply
