Oil falls, settles at two-month low as US fuel inventories rise

OIL prices fell to two-month lows on Wednesday as a surprise build in US fuel stockpiles signalled demand weakness and a potential peace deal between Russia and Ukraine continued to weigh on prices.

Brent crude settled down 49 cents, or 0.67 per cent, at US$72.53 a barrel. US West Texas Intermediate crude oil futures fell by 31 cents, or 0.45 per cent, to US$68.62.

Both benchmarks settled at their lowest since Dec 10.

US petrol and distillate inventories posted surprise builds last week even though crude oil stockpiles fell unexpectedly as refining activity ticked higher, the Energy Information Administration said.

“We had a knee jerk reaction down to the low. It was a bit of a surprise because of the crude oil number was a pretty big draw,” said Bob Yawger, director of energy futures at Mizuho.

Prospects for a peace deal between Russia and Ukraine are improving, ING commodities strategists said in a note, adding the market was also watching for implications of a minerals deal between the US and Ukraine.

“This would take us a step closer to Russian sanctions being lifted, removing much of the supply uncertainty hanging over the market,” the note said.

Downside risks on oil prices increased because of US President Donald Trump’s policies, such as initiatives to support higher oil exports by Iraq, said Saxo Bank analyst Ole Hansen. Trump’s tariff policies could also trigger a trade war and curb economic growth, Hansen added.

The US and Ukraine agreed on terms of a draft minerals deal central to Trump’s efforts to bring a swift end to the war in Ukraine, sources familiar with the matter told Reuters on Tuesday.

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Trump announced a reversal of concessions given to Venezuela by former President Joe Biden in 2022.

The Biden administration allowed Chevron to expand its production in Venezuela and bring the country’s crude oil to the US. REUTERS