Oil prices fell slightly in Asian trade on Wednesday after clocking a strong run-up in the past two sessions as traders braced for potentially tighter crude supplies in the coming months.
Heightened geopolitical tensions between Russia and Ukraine, which could attract more U.S. sanctions on Moscow, buoyed oil. Signs of a breakdown in U.S.-Iran nuclear talks could leave strict sanctions on Iranian oil unchanged.
Additionally, U.S. industry data showed oil inventories shrank much more than expected in the prior week, pointing to resilient fuel demand, especially as the summer season begins.
North American oil supplies are also expected to be disrupted by severe wildfires in Canada’s oil-rich Alberta province.
Brent oil futures for August fell 0.1% to $65.55 a barrel, while West Texas Intermediate crude futures fell 0.1% to $62.40 a barrel by 21:15 ET (01:15 GMT).
US inventories shrink more than expected- API
Data from the American Petroleum Institute showed U.S. oil inventories shrank by 3.3 million barrels (mb) in the week to May 30, much more than expectations for a draw of 0.9 mb.
The API data usually heralds a similar reading from official inventory data, which is due later in the day. The API prints also showed U.S. inventories shrinking for a second consecutive week.
Draws in U.S. inventories come ahead of the travel-heavy summer season, which usually sees outsized demand in the world’s biggest fuel consumer. But oil markets are on edge over any potential slowdown in demand, especially amid heightened uncertainty over the U.S. economy under President Donald Trump.
Oil buoyed by geopolitics, supply jitters
Oil was sitting on two days of strong gains, especially after Ukraine launched a series of deadly strikes against Russia, undermining progress towards a ceasefire.
Recent reports also showed that U.S. lawmakers were preparing even stricter restrictions on Moscow’s energy industry, this time targeting major Russian oil buyers India and China.
In the Middle East, laggard nuclear talks between the U.S. and Iran pointed to Washington maintaining or even tightening its sanctions on Tehran’s oil industry.
Oil was also encouraged in recent sessions by the Organization of Petroleum Exporting Countries and allies (OPEC+) deciding to increase production in July at a similar pace seen in the past two months. The move helped quell some concerns about oversupply.
Source: Investing