Oil prices rise as US crude draw points to firm demand; West Asia risks still linger

Oil prices ticked up on Thursday after data showed a sharper-than-expected drop in US crude and gasoline inventories, underscoring strong fuel demand across the world’s largest economy. However, investor caution continues to cloud the market amid geopolitical uncertainty in West Asia and ambiguity surrounding future OPEC+ production policy, as per Reuters.

US demand supports recovery

Brent crude futures rose 12 cents to $67.80 per barrel in early Asian trade, while US West Texas Intermediate (WTI) gained 20 cents to reach $65.12. Both benchmarks had jumped nearly one per cent on Wednesday following signs of resilient demand from US consumers, as quoted by Reuters.

Government data released by the Energy Information Administration (EIA) showed a significant drop of 5.8 million barrels in US crude inventories for the week ending June 20, well above analyst forecasts of a mere 797,000-barrel draw, according to Reuters.

Gasoline inventories also fell sharply by 2.1 million barrels against expectations of a 381,000-barrel build. This coincided with a surge in fuel consumption, with gasoline supplied often used as a proxy for demand hitting its highest level since December 2021, as per EIA data cited by Reuters.

“Some buyers are favouring solid demand indicated by falling inventories in US weekly statistics,” said Yuki Takashima, economist at Nomura Securities, as quoted by Reuters. He added that despite this bullish trend, “investors remain nervous, seeking clarity on the status of the Iran-Israel ceasefire”.

Geopolitical jitters and OPEC+ decisions

While tensions between Iran and Israel have eased following a US-brokered ceasefire, investors are watching closely for long-term diplomatic commitments. US President Donald Trump, in remarks on Wednesday, praised the cessation of hostilities but made it clear that Washington’s ‘maximum pressure’ campaign on Tehran, including oil sanctions remains in place, as per Reuters.

However, Trump signalled a potential softening of enforcement, stating the US might allow limited leeway in oil transactions to help Iran “rebuild” its economy, provided talks on curbing its nuclear programme make progress, according to Reuters reporting.

Market attention is also pivoting to production policy from the OPEC+ alliance. On Saturday, Rosneft CEO Igor Sechin suggested that the group, comprising the Organisation of the Petroleum Exporting Countries and allies like Russia could advance its planned production hikes by almost a year, as quoted by Reuters.

Such a move could inject fresh supply into the market, potentially capping oil price gains just as seasonal summer demand strengthens.

What's next?

Analysts are split on where oil prices go next. Takashima of Nomura forecasts that WTI could stabilise back in the $60–$65 per barrel range, levels seen before the West Asia flare-up, as per Reuters.

While physical demand remains strong, traders are closely monitoring upcoming US-Iran talks, any shifts in OPEC+ output strategy, and broader macroeconomic signals from top consumers like China and India.

With West Asia still fragile and major producers walking a tightrope between market share and price stability, oil markets remain delicately balanced.

(With inputs from the agencies)