Oil prices slipped on Wednesday following the release of unexpected increases in U.S. crude and fuel inventories, dampening market sentiment ahead of the U.S. summer driving season, a period typically associated with higher fuel demand.
Brent crude futures declined by 12 cents to $65.26 a barrel, while U.S. West Texas Intermediate crude fell 9 cents to $61.94.
Data from the U.S. Energy Information Administration revealed crude stockpiles rose by 1.3 million barrels last week, alongside increases of approximately 800,000 barrels in gasoline inventories and 600,000 barrels in distillate supplies. These inventory builds caught the market off guard, leading to a downturn in oil futures despite earlier gains fueled by geopolitical concerns.
Earlier reports had suggested that Israel might be preparing a strike on Iranian nuclear facilities, raising fears of potential supply disruptions in the Middle East. Iran, a major oil exporter and the third-largest producer within OPEC, ships over 1.5 million barrels per day, and any escalation in conflict could threaten these exports.
Concerns also remain that Iran might retaliate by obstructing tanker traffic through the Strait of Hormuz, a critical passageway for crude shipments from Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates.
Should tensions escalate, disruptions in the range of 500,000 barrels per day could occur, though market participants expect OPEC+ to respond swiftly to stabilize supply. Meanwhile, Kazakhstan has increased its oil production by 2% in May, defying calls from OPEC+ to curb output, adding further complexity to the global supply dynamics.
Diplomatic efforts between the U.S. and Iran continue, with multiple rounds of talks this year focused on Iran’s nuclear program. However, recent statements from U.S. officials and Iran’s Supreme Leader suggest that a breakthrough remains distant, contributing to the ongoing uncertainty influencing oil markets.
