SINGAPORE: Oil prices retreated on Wednesday as traders eyed a potential jump in US crude inventories, though prices held near two-week highs amid relief after the United States and China agreed to temporarily lower their reciprocal tariffs.
Brent crude futures fell 32 cents, or 0.5 percent, to $66.31 a barrel by 10:00 a.m. Saudi time. US West Texas Intermediate crude slipped 32 cents, or 0.5 percent, to $63.35. Both benchmarks had climbed more than 2.5 percent in the previous session.
The two largest economies agreed on Monday to pause their trade war for at least 90 days, with the US cutting tariffs to 30 percent from 145 percent and China slashing duties on US imports to 10 percent from 125 percent.
“The US-China economic pause might have crafted a narrative that could invigorate demand amidst a backdrop of cautious optimism,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
However, expectations of a staggering jump in US oil inventories capped optimism for now, Sachdeva added.
“This sharp contrast to last week’s substantial draw signals that the demand side is still grappling with significant challenges, leaving market watchers on edge and wondering where the next twist will come from,” she said.
Crude stocks were up by 4.3 million barrels in the week ended May 9, market sources said, citing American Petroleum Institute figures on Tuesday.
Official weekly inventory data from the US Energy Information Administration is due on Wednesday at 5:30 p.m. Saudi time.
Investors remain watchful of demand signals. Rystad energy analysts said in a note the agreement had “eroded some demand side pessimism,” while cautioning against any lingering impact of the tariffs despite the rollbacks.
The market is also watching US President Donald Trump’s Gulf trip, begun on Tuesday with an appearance at an investment forum in Riyadh, where he said the US would lift longstanding sanctions on Syria and secured a $600-billion pledge of Saudi investment.
Rystad Energy’s global head of commodity markets Mukesh Sahdev said preventing oil price spikes over the summer travel season will be a key part of the president’s agenda on the trip.
The US could take advantage of lower prices to buy more Middle East crude for its Strategic Petroleum Reserve, he added.
“The big unknown for the market is how US actions related to Iran, Russia and Venezuela will result in supply disruptions or additions,” Sahdev said.
On Tuesday, the US slapped fresh sanctions on about 20 companies it said were helping Iran’s Armed Forces General Staff and its front company, Sepehr Energy, send Iranian oil to China.
The sanctions follow a fourth round of US-Iran talks in Oman to tackle disputes over Iran’s nuclear program.
