Oil partially recovers losses in early Thursday trade

Oil partially recovered from its recent drop after a sharp decline on Wednesday driven by a significant increase in US crude inventories, raising concerns about weakening demand, Bloomberg reported.

In July, Brent traded below $84 per barrel following its plunge to its lowest level since mid-March in the previous session, while West Texas Intermediate (WTI) hovered around $79. US crude stockpiles surged by 7.3 million barrels last week, marking the largest increase since early February, according to data from the Energy Information Administration.

Oil prices have shed over 5 per cent this week after reaching their highest levels since October last month, triggered by Iran’s unprecedented attack on Israel.

The downturn corresponds with signs of reduced tensions in the Middle East, including the potential for a historic agreement between Washington and Riyadh, along with concerns that the Federal Reserve will maintain high-interest rates, further dampening demand in fuel markets as the summer driving season kicks off.

“Concerns about demand took centre stage for oil traders as EIA data revealed a spike in crude inventories and Fed Chair Powell hinted at a delay in initiating the easing cycle,” noted Charu Chanana, head of FX strategy at Saxo Capital Markets Pte. She added that some of the geopolitical premium for oil has also diminished.

On the supply side, OPEC+ has struggled to implement its latest production cuts. Iraq and the United Arab Emirates continued to exceed their agreed limits by pumping several hundred thousand barrels per day (bpd), according to a Bloomberg survey.