Oil prices declined by about 1 per cent on Thursday after U.S. crude inventories recorded their largest weekly increase in three years, adding to signs of softness in the physical market.
Market data from the U.S. Energy Information Administration showed a sharp build in crude stockpiles, heightening concerns about near-term demand and supply balances in the world’s largest oil-consuming nation.
Analysts said the inventory surge, combined with weaker refining margins and subdued spot market activity, put downward pressure on benchmark crude prices.
Traders are also closely watching renewed diplomatic engagement between Iran and the United States over Tehran’s nuclear programme.
Market participants are weighing whether negotiations could ease tensions and reduce the risk of a supply-disrupting military confrontation in the Middle East, a key oil-producing region.
A diplomatic breakthrough could eventually pave the way for adjustments to sanctions affecting Iranian crude exports, potentially adding more barrels to the global market. Conversely, a collapse in talks could heighten geopolitical risks and threaten supply routes.
Beyond geopolitics, traders pointed to signs of weakness in the physical oil market, including softer differentials and cautious buying from refiners, particularly in Asia.
While global demand has shown resilience in recent months, concerns remain about economic growth prospects in major economies and the pace of fuel consumption recovery.
Energy analysts say oil prices are likely to remain sensitive to inventory data, macroeconomic indicators and developments in Middle East diplomacy in the coming weeks.
With supply dynamics shifting and geopolitical risks still present, volatility in crude markets is expected to persist as investors balance near-term fundamentals against longer-term uncertainties.
