Oil prices fell in Asian trade on Thursday as momentum in a recent rally was culled by data showing an unexpected build in U.S. inventories, while talks over a potential ceasefire in the Israel-Hamas war dented bets on more supply disruptions.
Media reports showed Hamas leader Ismail Haniyeh in Egypt for potential peace talks with Israel, coming just a week after the U.S. vetoed a United Nations resolution for a ceasefire in the war.
Haniyeh’s talks with Israel raise the prospect of a potential de-escalation in the conflict, which could in turn lessen disruptions in shipping activity in the Red Sea.
Brent oil futures expiring February fell 0.8% to $79.05 a barrel, while West Texas Intermediate crude futures fell 0.7% to $73.91 a barrel by 20:05 ET (01:05 GMT).
Crude prices rebounded sharply from five-month lows over the past week, boosted by the prospect of supply disruptions in the Middle East after Yemen-backed forces attacked several vessels in the Red Sea over the Israel-Hamas war.
The move saw oil and shipping firms steer clear of the Suez Canal, pointing to potential delays in deliveries. The U.S. also launched a 10-nation naval force to enforce security in the region.
But whether this had a tangible impact on global crude supplies remained unclear, especially as European and U.S. oil inventories remained high, as did production in the Americas.
Traders told Reuters that unless the disruptions in the Red Sea persisted for more than a few weeks, they were unlikely to impact supplies.
The Israel-Hamas war so far had little impact on oil supplies since its onset in October. But traders still remained on edge over the conflict drawing in more Middle Eastern powers, which could tangibly disrupt supplies from the oil-rich region.
US inventory build cuts short crude rebound
Oil prices faced pressure on Wednesday following data showing an unexpected build in U.S. crude stockpiles.
U.S. inventories grew 2.9 million barrels in the week to Dec. 15, ducking expectations for a draw of 2.3 million barrels. Production remained close to record highs, while a bigger-than-expected build in gasoline and distillate inventories also pointed to cooling fuel demand.
The data ramped up concerns over well-supplied oil markets in 2024, especially after underwhelming production cuts from the Organization of Petroleum Exporting Countries (OPEC). Oversupply concerns had put oil prices at five-month lows at the beginning of December.
A rebound in the dollar also pressured crude, as the greenback rose sharply on Wednesday amid some profit taking on Wall Street and a sharp drop in the pound. Markets also questioned just when the Federal Reserve will begin trimming interest rates in 2024.
