Oil prices decline amid growing inventories and supply concerns.

Oil prices experienced a decline on Wednesday following the revelation of a surge in both crude and fuel inventories within the United States, signaling weakened demand. Additionally, cautious anticipation emerged regarding supply expectations in anticipation of an upcoming OPEC+ policy meeting next month.

Brent crude oil futures recorded a drop of $1.37, equivalent to 1.65 percent, settling at $81.79 per barrel by 09:42 GMT. Similarly, US West Texas Intermediate (WTI) crude futures witnessed a decrease of $1.41, representing a decline of 1.80 percent, reaching $76.97 a barrel.

Over the course of the past month, Brent has experienced a reduction exceeding 8.50 percent, while WTI has fallen by more than 10 percent.

Market sources, citing figures from the American Petroleum Institute, disclosed that US crude stocks surged by 509,000 barrels during the week ending May 3. Furthermore, gasoline and distillate fuel inventories also observed an uptick.

“Investment Petroleum Institute (API) numbers released overnight were moderately bearish due to stock builds in both crude and products… Concern over weaker-than-usual U.S. gasoline demand and this stock-build have weighed on the prompt RBOB gasoline crack,” commented ING analysts in a note to clients.

Official US government data on stockpiles is scheduled for release at 1430 GMT. Analysts surveyed by Reuters anticipate a decline of approximately 1.1 million barrels in US crude oil inventories for the previous week.

Market sentiments were further impacted by cautious expectations regarding supply cuts from the Organization of the Petroleum Exporting Countries and its allies (OPEC+), ahead of the June 1 policy meeting.

“Oil prices have come under further pressure as noise around OPEC+ production policy grows,” noted the ING analysts.

“Expectations are that members will extend their additional voluntary supply cuts beyond the second quarter of this year.”

Simultaneously, the prospect of a ceasefire in Gaza has exerted downward pressure on oil prices in recent sessions, with some analysts suggesting a decline in the risk premium associated with oil.

“The fall in oil prices since Iran and Israel’s back-and-forth attacks suggests that some of the risk premium in prices has now unwound,” stated economist Bill Weatherburn from Capital Economics in a client note.

“Prices continue to be supported by OPEC+ production cuts but we suspect that members will gradually unwind these cuts from July, pushing oil prices lower,” he added.

The United States remains optimistic about negotiations for a Gaza ceasefire bridging the gap between Israel and Hamas. US Central Intelligence Agency Director Bill Burns is scheduled to travel to Israel on Wednesday for discussions with Israeli Prime Minister Benjamin Netanyahu and other top officials, according to a source familiar with the matter cited by Reuters.

Some analysts maintain the expectation that short-term demand will remain well-supported, which has limited overall price declines.

“Much talk of economic run cuts in recent weeks is overblown in our opinion, with margins still healthy enough, which means rather that Asian demand could rather pick up once turnarounds peak and diminish,” remarked Sparta Commodities analyst Neil Crosby.