Oil prices fell to their lowest in two months on Wednesday as a surprise build in U.S. fuel inventories signaled weakening demand and the potential for a peace deal between Russia and Ukraine continued to weigh on prices.
Brent crude futures were down 49 cents, or 0.67%, at $72.53 a barrel. U.S. West Texas Intermediate crude futures fell 31 cents, or 0.45%, to settle at $68.62.
Both benchmarks settled at their lowest levels since Dec. 10.
U.S. gasoline and distillate inventories posted a surprise increase last week even as crude inventories fell unexpectedly as refining activity increased, the Energy Information Administration said.
"We had a knee-jerk reaction to the low. It was a little surprising because the crude numbers are a pretty big draw," said Bob Yawger, director of energy futures at Mizuho. The prospects for a peace deal between Russia and Ukraine are improving, ING commodity strategists said in a note, adding that the market is also looking at the implications of a U.S.-Ukraine minerals deal.
"This would bring us one step closer to the lifting of Russian sanctions, removing much of the supply uncertainty hanging over the market," the note said.
The downside risk to oil prices is heightened by U.S. President Donald Trump's policies, such as an initiative to support higher oil exports by Iraq, Saxo Bank analyst Ole Hansen said. Trump's tariffs could also trigger a trade war and curb economic growth, Hansen added.
The U.S. and Ukraine have agreed on the terms of a draft minerals deal that is central to Trump's efforts to end the war in Ukraine, sources familiar with the matter told Reuters on Tuesday.
Concerns that a trade war could slow demand have eased concerns about tighter near-term oil supplies despite new U.S. sanctions on Iran, ANZ Bank analysts said in a note. Trump announced the cancellation of concessions granted to Venezuela by former President Joe Biden in 2022. The Biden administration allowed Chevron to expand its production in Venezuela and bring the country's crude oil to the US. (Newsmaker23)
Source: Reuters
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