Oil futures: Crude struggles at lower levels, Brent stays below $84/b

Quantum Commodity Intelligence – Crude oil futures were little changed as benchmarks failed to hold earlier gains despite initially recovering Thursday, after prices tumbled to around seven-week lows in the previous session.

Front-month Jul24 ICE Brent futures were trading at $83.83/b (1845 GMT), compared to the day's range of $83.05-$84.44/b and Wednesday's settle of $83.44/b.

At the same time Jun24 NYMEX WTI was trading at $79.11/b versus Wednesday's settle of $79/b.

The midweek price slump came largely on the back of a steep increase in US crude oil inventories, as the EIA reported commercial stocks swelled by 7.3 million barrels last week to a 10-month high at 460.9 million barrels.

US gasoline stocks also rebounded as imports surged and domestic output climbed, outpacing a small rise in demand. Inventories are now around 1.9% higher than the same time last year but just under 3% below their five-year average for the week.

Ceasefire

Meanwhile, Gaza ceasefire talks continued, although the situation remains tense as Israel prepares for a ground offensive in Rafah, while a senior IDF official said the military was preparing for an offensive against Hezbollah in the north.

"The risk premium in the oil market continues to erode as geopolitical tension in the Middle East eases. However, this is a factor that could return to the market, so is not something that should be fully discounted," said Warren Patterson, head of ING's commodity research.

Inflation and the slow pace of rate cuts remain a broader market concern, although Federal Reserve Chair Jerome Powell has largely ruled out that the central bank's next move could be upwards: "I think it's unlikely that the next policy rate move will be a hike," he said.

The Fed, as anticipated, opted to hold rates steady, citing a "lack of further progress" in bringing inflation back down toward its 2% goal.

"As was widely expected, the FOMC left the fed funds target range unchanged at 5.25%-5.50% at the conclusion of its May meeting. It was evident, however, that the Committee believes inflation's return to its 2% objective likely has a somewhat longer and uncertain journey ahead," said Wells Fargo in its latest report.