Crude Oil Futures Fall as US Inventory Data Shows Increase

Crude Oil Futures Decline as US Inventory Levels Rise Unexpectedly

Crude oil futures edged lower on Wednesday morning after the American Petroleum Institute (API) reported a surprising build in US crude oil inventories for the week ending May 9. July Brent futures were down 0.50 per cent at $66.30 while June WTI contracts fell 0.46 per cent to $63.38 as of 9:59 am. On the Multi Commodity Exchange (MCX), May crude oil futures slipped by 0.24 per cent to ₹5,417 compared to ₹5,430 in the previous session, while June contracts declined 0.28 per cent to ₹5,399 from ₹5,414.

Highlights:

• Brent futures fell 0.50% to $66.30, WTI down 0.46% to $63.38 as of 9:59 am

• MCX May crude fell 0.24% to ₹5,417; June crude declined 0.28% to ₹5,399

• API reported a 4.29 million barrel increase in US inventories for week ending May 9

Market Expects Official EIA Data After Surprise Build in API Report

The market had anticipated a drawdown of around 2 million barrels in US crude stocks; however, the API report revealed a significant build of 4.29 million barrels, creating downward pressure on oil prices. As the US is the largest crude consumer globally, inventory fluctuations have a pronounced impact on global pricing. Traders are now looking ahead to the Energy Information Administration’s (EIA) official data, scheduled for release later on Wednesday, which will offer a more definitive picture of current inventory levels.

Highlights:

• API inventory report showed a surprise increase vs market expectation of a draw

• EIA official inventory data awaited for clearer outlook

• US remains the world’s largest crude consumer, making inventory changes impactful

US Inflation Cools in April, Weak Dollar Supports Tuesday’s Oil Rally

Data from the US Bureau of Labor Statistics showed that inflation slowed in April, with the annual consumer price index falling to 2.3 per cent from 2.4 per cent in March—below the market expectation of 2.4 per cent. This easing of inflation led to a weaker US dollar, which in turn provided support to the crude oil market on Tuesday. ICE Brent rallied by 2.6 per cent, reaching its highest level since late April. The commodities team at ING Think attributed the rally to both softer inflation and geopolitical concerns related to Iranian oil exports.

Highlights:

• US inflation eased to 2.3% in April vs 2.4% in March, lower than expected

• Weak US dollar provided tailwinds for Tuesday’s oil rally

• ICE Brent surged 2.6% on Tuesday, reaching late-April highs

Sanctions on Iran and OPEC+ Strategy Fuel Oil Market Speculation

US President Donald Trump’s administration imposed new sanctions on a network involved in shipping Iranian crude oil to China, raising the prospect of deeper sanctions if no progress is made on a renewed Iran nuclear deal. While Trump has warned of targeting Iran’s oil exports, analysts say a complete cutoff is unlikely. Iran is currently exporting around 1.6 million barrels per day, compared to just 600,000 barrels in 2019 under prior sanctions. Any reduction in Iranian oil flows would create space for OPEC+ members to increase output, and market participants now await the group’s decision on July production levels, expected on June 1.

Highlights:

• US sanctioned a network facilitating Iranian oil exports to China

• Iran currently exports 1.6 million barrels/day; 2019 average was 600,000

• OPEC+ expected to maintain aggressive supply hikes; July policy decision due June 1

Broader Commodity Market Mixed; Aluminium Gains, Guargum and Turmeric Decline

In other commodities, May aluminium futures on MCX rose 1.02 per cent to ₹242.10 during early trading hours on Wednesday, compared to the previous close of ₹239.65. However, agricultural commodities posted losses: May guargum contracts on NCDEX fell 0.61 per cent to ₹9,555, down from ₹9,614, and May turmeric (farmer polished) futures declined 0.58 per cent to ₹14,722, compared to the previous close of ₹14,808.

Highlights:

• MCX May aluminium up 1.02% to ₹242.10

• NCDEX May guargum down 0.61% to ₹9,555

• NCDEX May turmeric down 0.58% to ₹14,722