Oil prices rise on US trade optimism, sharp fall in crude stockpiles

On Thursday, Oil prices inched higher, supported by renewed optimism over US-led trade negotiations and a steeper-than-expected drop in American crude stockpiles. As US President Donald Trump’s recent tariff deal with Japan raised hopes of a broader easing of global trade tensions, markets remained cautiously upbeat. As per Reuters, Brent crude futures inched by 24 cents, or 0.4 per cent, to $68.75 a barrel by 0032 GMT. Meanwhile, US West Texas Intermediate (WTI) crude rose by 25 cents, or 0.4 per cent, to $65.50 per barrel. Though oil markets had remained subdued earlier in the week but the tide turned after the US and Japan reached a significant trade agreement. The deal spares Tokyo from new American auto import tariffs in exchange for a $550 billion package of investments and loans flowing into the US economy, as per Reuters.

“Buying was driven by optimism that progress in tariff negotiations with the US would help avoid a worst-case scenario,” said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, as quoted by Reuters. However, Kikukawa cautioned that crude gains may remain capped due to ongoing uncertainty around US-China trade talks and the fragile status of Russia–Ukraine peace negotiations. He further predicted that WTI prices are likely to stay range-bound between $60 and $70 per barrel.

EU-US deal in the works?

Adding to the upbeat tone, two European diplomats told Reuters that the US and the European Union are inching closer to a separate trade pact. The potential deal could include a baseline 15 per cent tariff on EU goods, with provisions for exemptions. This follows the Japan breakthrough and signals Washington’s strategy of building economic alliances to consolidate influence.

US crude stockpiles fall

On the supply front, US inventory data released by the Energy Information Administration (EIA) provided further support for oil prices. According to Reuters, US crude inventories fell by 3.2 million barrels last week to 419 million barrels. That drawdown was double the market expectation of a 1.6 million-barrel decline, indicating stronger-than-anticipated domestic demand.

Impact of sanctions on Russian oil

On Wednesday, peace talks between Russia and Ukraine were held in Istanbul, focusing on prisoner exchanges. However, a breakthrough on ceasefire terms or a direct summit between leaders appears distant, as per Reuters. Meanwhile, oil flows from Russia’s main Black Sea ports were temporarily disrupted. Industry sources told Reuters that new regulations effectively halted shipments from Kazakhstan via a key export consortium that includes American energy firms. Meanwhile, the US is considering broader energy sanctions.

On Tuesday, the US Energy Secretary signalled that Washington may impose fresh sanctions on Russian oil in an effort to bring the Ukraine war to an end. The EU, on its part, adopted an 18th sanctions package on Friday, which includes lowering the price cap for Russian crude exports.

(With inputs from the agencies)