US Oil Stockpile Increase Dampens Recent Price Gains

Oil Prices

Oil prices dipped slightly, pulling back from a seven-week high, as increasing US oil stockpiles dampened investor enthusiasm amidst a rise in stock market prices. Brent crude dropped to nearly $85 a barrel after reaching its highest intraday price since May 1, while West Texas Intermediate held above $81 a barrel.

The American Petroleum Institute reported that US crude inventories increased by 2.26 million barrels last week, according to sources familiar with the data. If confirmed by official figures, this would represent the third consecutive weekly rise in stockpiles. The API also noted that stockpiles at the Cushing, Oklahoma hub had increased.

This inventory buildup offset the positive sentiment generated by climbing stock prices. On Tuesday, the S&P 500 hit another record high, contributing to a strong rebound in oil prices. This rebound was also fueled by trend-following technical traders.

Oil prices had rebounded from earlier losses this month after OPEC+ hinted at potential supply increases, clarifying that such a plan was conditional. Key timespreads have widened, indicating robust near-term demand, while refiners in Asia are resuming capacity after maintenance, despite weak margins, boosting crude consumption.

“There are implicit signs that refiners are preparing for the summer season,” said Tamas Varga, an analyst at brokerage PVM. “Front-month Brent is more than $8 a barrel above the post-OPEC+ meeting trough, showing genuine optimism that the global oil balance will eventually tighten.”

However, the recent surge in oil prices has indicated that futures may be approaching overbought levels. Brent’s relative strength index on a nine-day basis has surpassed 70, suggesting a potential pullback.

Trading volumes in oil futures are expected to be lower on Wednesday due to a US holiday.