Oil prices recovered slightly in early Asian trading on Wednesday after falling to one-month lows in Tuesday’s session. Sentiment in markets remains bearish, with traders focused on a potential peace deal between Ukraine and Russia.
At the time of writing, Brent crude was trading at around $62.72 a barrel while West Texas Intermediate was changing hands at $58.17 – both up by 0.38%.
Against a backdrop of increasingly bearish signals, the American Petroleum Institute provided a rare piece of positive news for oil prices, with U.S. inventories falling 1.9 million barrels in the week ending November 21. Traders will be watching the EIA data closely on Wednesday for confirmation of this draw.
The slight rebound in prices also reflects expectations of a potential rate cut by the Federal Reserve, which could soften the U.S. dollar and lend support to dollar-priced commodities such as oil.
There is also the risk of further supply disruptions as Russia and Ukraine continue to attack energy infrastructure even as peace talks look to be progressing. Prices saw a significant spike just two weeks ago when Ukraine hit a major Russian export hub and disrupted oil flows.
Despite these upside risks, the overall sentiment in markets remains decidedly bearish as a supply glut looms. Continued production increases from OPEC+ have kept oil prices under pressure this year, while demand has remained soft due to slow economic growth and uncertainty.
This week, renewed hope of a Ukraine-Russia peace deal has raised the prospect of Russian barrels returning to the market, which would worsen any potential glut.
Traders will be closely watching the EIA inventory report ahead of Thanksgiving, but it’s going to take a more dramatic catalyst for oil prices to move significantly higher in the near term.
By Charles Kennedy for Oilprice.com
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