Oil Prices Gain As Inventory Drops, Global Trade Deals Ease Recession Fears

Oil prices rose on Thursday as positive trade-related developments alleviated concerns about economic growth, and U.S. crude inventories dropped sharply.

Benchmark Brent crude prices rose 0.9% to $69.12 per barrel, while U.S. West Texas Intermediate crude prices gained 1% at $65.93 per barrel at 2.30 a.m. ET.  Both contracts were trading at a slightly higher level than a month earlier, when the oil prices had eased following the conclusion of the Israel-Iran conflict.

The U.S. and Japan have agreed to a trade deal that will lower tariffs on Japanese auto exports and exempt Japan from additional levies. In exchange, Tokyo agreed to invest approximately $550 billion in the U.S. through loans and other financial commitments.

A U.S.-European Union trade deal is also reportedly witnessing progress toward an agreement where the EU could accept a 15% tariff on most products. The U.S. is the largest destination for EU exports and second second-largest partner for import of goods.

According to a Reuters report, Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said the trade talks have been received positively by investors, who believe the worst-case scenario will be avoided.

Retail sentiment on Stocktwits about the United States Oil Fund (USO) was in the ‘bearish’ territory at the time of writing.

Separately, U.S. Energy Information Administration data revealed that crude inventories in the world’s largest economy fell by 3.2 million barrels to 419 million barrels last week, marking a larger-than-expected drop. U.S. gasoline stock also fell by 1.7 million barrels, exceeding estimates.

According to the Reuters report, ANZ analysts noted that the EIA data suggest demand over the Northern Hemisphere in summer has been relatively strong.

However, the possible easing of geopolitical tensions has put downward pressure on oil prices. Ukraine and Russia discussed prisoner swaps in the fresh round of peace talks in Istanbul; however, the two sides have not shown any progress toward a ceasefire.

Also See: China Almost Turns Off the Tap On US Energy Imports Ahead Of Crucial Trade Meet

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