Oil market rebounds: Surging prices amid crude inventory declines and geopolitical dynamics

Oil prices surged on Wednesday from a multi-day losing streak, driven by the largest slide of US crude in the inventory. Further price increases were capped by expectations for a nearing ceasefire deal in West Asia.

Brent crude futures for September gained 46 cents to $81.47 per barrel as of 0020 GMT, while US West Texas Intermediate crude for September rose 42 cents to $77.38 per barrel.

Market sources, drawing from American Petroleum Institute (API) statistics, indicate that US crude oil inventories dropped in the past week, along with those of gasoline and distillates. Such reductions helped stop the downtrend. Specifically, US crude stocks dropped 3.9 million barrels for the week ended July 19, while gasoline inventories declined by 2.8 million barrels and distillates fell by 1.5 million barrels. This marks the first time that US crude stocks have fallen for four consecutive weeks since September 2023.

WTI had lost 7 per cent in the last four sessions, while Brent crude was down nearly 5 per cent in three.

Government data on oil inventories will be released on Wednesday, adding more detail to the supply situation.

Oil prices dropped to six-week lows on Tuesday, with Brent closing at its lowest since June 9. The declines were acted upon further by ongoing ceasefire negotiations between Israel and Hamas, facilitated by US President Joe Biden and mediated by Egypt and Qatar.

Prices also suffered on continued concern that economic softening in China, which is the world's biggest crude importer, would weaken global oil demand.

The bottom line is that inventories of US crude are dropping, providing some support for prices, though prospects related to West Asia ceasefire and poor China outlook have applied downward pressures. It is the play of these factors against one another that shall drive oil prices in the future.