By Nicole Jao
NEW YORK (Reuters) – Oil prices fell to two-month lows on Wednesday as a surprise build in U.S. fuel stockpiles signalled demand weakness and a potential peace deal between Russia and Ukraine continued to weigh on prices.
Brent crude was down 48 cents, or 0.66%, at $72.54 a barrel by 1:20 p.m. EST (1820 GMT). U.S. West Texas Intermediate crude oil futures fell by 35 cents, or 0.51%, to $68.58.
U.S. gasoline and distillate inventories posted surprise builds last week even though crude oil stockpiles fell unexpectedly as refining activity ticked higher, the Energy Information Administration said on Wednesday.
“We had a knee jerk reaction down to the low. It was a bit of a surprise because of the crude oil number was a pretty big draw,” said Bob Yawger, director of energy futures at Mizuho.
Prospects for a peace deal between Russia and Ukraine are improving, ING commodities strategists said in a note on Wednesday, adding the market was also watching for potential implications of a minerals deal between the U.S. and Ukraine.
“This would take us a step closer to Russian sanctions being lifted, removing much of the supply uncertainty hanging over the market,” the note said.
Downside risks on oil prices increased because of U.S. President Donald Trump’s policies, such as initiatives to support higher oil exports by Iraq, said Saxo Bank analyst Ole Hansen. Trump’s tariff policies could also trigger a trade war and curb economic growth, Hansen added.
The U.S. and Ukraine agreed on terms of a draft minerals deal central to Trump’s efforts to bring a swift end to the war in Ukraine, sources familiar with the matter told Reuters on Tuesday.
Fears that a trade war could slow demand have eased worries about tighter near-term oil supply despite fresh U.S. sanctions against Iran, ANZ Bank analysts said in a note.
(Reporting by Nicole Jao and Shariq Khan in New York, Enes Tunagur in London and Jeslyn Lerh in Singapore; Editing by David Goodman, Rod Nickel and David Gregorio)
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