Oil prices traded in a tight range during Thursday's Asian trade, as market dynamics balanced the impact of a surprising rise in U.S. gasoline inventories with supply concerns easing following a ceasefire agreement between Israel and Hezbollah on Wednesday.
By 1:45 pm AEDT (2:45 pm GMT) Brent crude futures and U.S. West Texas Intermediate (WTI) crude traded within a range of 0.1%.
Overnight, the Energy Information Administration (EIA) reported an unexpected build in U.S. gasoline inventories, which rose by 3.3 million barrels to 212.2 million barrels for the week ending November 22, compared to an anticipated draw of 46,000 barrels.
Crude inventories fell by 1.8 million barrels during the same period, significantly exceeding expectations for a 605,000-barrel draw.
The market also faced pressure from macroeconomic factors. Recent U.S. PCE data suggested that progress in reducing inflation had stalled, potentially limiting the Federal Reserve's ability to implement substantial interest rate cuts in 2025.
Traders are currently pricing in a 70% chance of a 25-basis-point rate cut at the Fed's December meeting, though rates are expected to remain unchanged in early 2025. Elevated borrowing costs could dampen economic activity and weaken oil demand.
Both Brent and WTI benchmarks had settled lower on Tuesday after Israel agreed to a ceasefire with Hezbollah, effective Wednesday. The ceasefire, brokered by the U.S. and France, temporarily eased geopolitical risks in the Middle East.
Adding a layer of complexity, OPEC+ sources indicated discussions to further delay a planned increase in oil output may be on the cards. The group, comprising OPEC members and allies such as Russia, controls approximately half of the world’s oil supply.
Weak global demand and rising output from non-OPEC+ producers have cast doubt on the group's production easing plans, with a final decision expected at their 1 December meeting.
Adding to market uncertainties, U.S. President-elect Donald Trump's proposed tariffs on all imports from Mexico and Canada could include crude oil.