By Adedapo Adesanya
Oil prices went down on Wednesday after US crude inventories rose unexpectedly as worries that a wider Middle East conflict could threaten supplies from the largest crude production regions of the world slightly eased.
These brought down the Brent crude futures by 93 cents or 1.15 per cent to $79.76 per barrel and moderated the US West Texas Intermediate (WTI) crude futures by $1.37 or 1.8 per cent to $76.98 per barrel.
US crude inventories rose by 1.4 million barrels, compared with estimates for a 2.2 million barrel drop, data from the US Energy Information Administration (EIA) showed.
The build was the first after six straight weeks of draws.
The data release came as a surprise to investors who had a day earlier set their sights on the API inventory report that showed stockpiles moving in the opposite direction, with a 5.2-million-barrel decline.
Earlier on Wednesday, US economic data showed that year-over-year inflation in July reached its lowest level in over three years.
Market analysts indicated that the worst is potentially over, lending optimism to the potential for the Federal Reserve to cut rates in September.
According to the US Department of Labour, consumer prices increased 0.2 per cent from June to July–a slight increase only, compared with a slight drop in the previous reporting period. Year-on-year, prices rose 2.9 per cent, down from 3 per cent in June.
Analysts are latching onto the fact that this is the softest increase in inflation since March 2021 and could help buoy oil prices.
In terms of the Middle East escalation, uncertainty still rules the day, despite indications that Gaza ceasefire talks, set to potentially get underway on Thursday–with or without Hamas–could delay an Iranian strike on Israel.
Iran had vowed a severe response to the killing of the leader of Hamas late last month. Three senior Iranian officials have said that only a ceasefire deal in Gaza would hold Iran back from direct retaliation against Israel for the assassination.
Israel has neither confirmed nor denied its involvement, but it is fighting in Gaza against Hamas after the group attacked Israel in October.
To counter Iran, the US Navy has deployed warships and a submarine to the Middle East.
Meanwhile, the International Energy Agency (IEA) on Tuesday trimmed its 2025 estimate for oil demand growth, citing the impact of a weakened Chinese economy on consumption. That came after OPEC cut expected demand for 2024 for similar reasons.
Also, some dull July economic performances in China have fed worries about the world’s second-largest economy and the largest oil importer.