Oil prices recover marginally

2 May 2024 , 11:36 AM

Oil prices fell to a seven-week low on Wednesday on expectations of Israel-Hamas ceasefire, and rising crude oil inventory. However, prices recovered on Thursday on the possibility that the U.S. may begin purchasing crude oil for its petroleum reserves.

Brent crude futures for July rose 21 cents, or 0.3%, to $83.65 a barrel, ending a three-day losing streak. June delivery of U.S. West Texas Intermediate (WTI) oil increased by 22 cents, or 0.3%, to $79.22 a barrel.

On Wednesday, both benchmarks dropped more than 3%, hitting a seven-week low.

The United States intends to buy back oil at $79 per barrel or less in order to rebuild its Strategic Petroleum Reserve (SPR), which will be depleted in 2022 following a historic sell from the emergency stockpile.

Expectations that Israel and Hamas would soon agree to a ceasefire in the Middle East increased after Egypt stepped up its pressure.

The U.S. position and a warning from the U.N. that the attack would result in “tragedy” notwithstanding, Israeli Prime Minister Benjamin Netanyahu has vowed to carry out the long-promised assault on the southern Gaza city of Rafah.

The U.S. Energy Information Administration (EIA) reported that during the week ending April 26, oil stockpiles increased by 7.3 million barrels to 460.9 million barrels, exceeding the 1.1 million barrel drop that analysts had predicted in a Reuters poll.

According to the EIA, crude stockpiles were at their highest level since June. 

The U.S. Federal Reserve, however, raised concerns about recent weak inflation data while maintaining interest rates at the same level on Wednesday and signalling that it is still inclined towards eventually lowering borrowing costs.

The Fed acknowledged that “inflation has eased” in its most recent policy statement. Any postponement of rate reductions may hinder economic expansion and reduce the need for oil.

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