Oil prices edged up on Wednesday after U.S. government data showed a draw in fuel inventories, though gains were capped by the Federal Reserve’s decision to hold interest rates steady. Brent crude settled up 22 cents (0.31%) at $70.78, while WTI rose 26 cents (0.39%) to $67.16. U.S. crude stocks rose by 1.7 million barrels last week, surpassing expectations, but distillate inventories fell sharply by 2.8 million barrels, far exceeding forecasts. Analysts viewed the net product draw as incrementally bullish for prices.
Geopolitical tensions continued to impact markets. The Israeli military resumed operations in Gaza, breaking a ceasefire, while Trump vowed to persist with strikes on Yemen’s Houthis and hold Iran accountable for attacks on Red Sea shipping. Traders refocused on these Middle East risks, adding volatility to the market.
The Federal Reserve maintained interest rates at 4.25%-4.50% but reiterated expectations of rate cuts later this year, reflecting slowing growth and easing inflation. Meanwhile, fears of a U.S. recession, exacerbated by tariffs on Canada, Mexico, and China, weighed on energy demand outlooks.
Ceasefire negotiations between Russia and Ukraine remained uncertain despite an agreement to halt energy infrastructure attacks. Both sides accused each other of violations shortly after the deal was announced. Analysts noted that even if a full peace deal is reached, it would take time before Russian energy exports meaningfully increase.