Oil prices crept up on Thursday, recovering slightly from the previous session’s slide, as a larger-than-anticipated drop in U.S. crude inventories helped counter growing worries that diplomatic pressure from Washington to end the Russia-Ukraine conflict could push additional supply into an already well-stocked market.
As of 07:14 GMT, Brent crude rose 20 cents, or 0.31%, to $63.72 a barrel, while U.S. West Texas Intermediate gained 22 cents, or 0.37%, to trade at $59.66.
The modest bounce followed a 2.1% decline on Wednesday after a Reuters report suggested the United States had urged Ukraine to consider a U.S.-drafted peace proposal — one that would involve ceding territory and certain weapons — according to two sources familiar with the discussions.
The report sparked speculation that an eventual agreement might pave the way for relaxed sanctions on Russian oil exports, potentially increasing global supply at a time when barrels are accumulating in floating storage and major producers have been ramping up output.
In a Thursday commentary, ING analysts noted that Ukraine was unlikely to embrace the proposal, arguing it appeared to tilt in Moscow’s favor, but added that “signs that the U.S. is still trying to work on a deal eases some concerns over further sanctions against Russia and also how strongly current curbs will be enforced.”
Offsetting some of the bearish sentiment was fresh data from the Energy Information Administration showing a larger-than-forecast drawdown in U.S. crude stocks. The decline reflected stronger refinery activity, supported by healthy margins, and firm export demand.
Inventories dropped by 3.4 million barrels to 424.2 million for the week ending November 14 — far above analysts’ expectations in a Reuters survey for a 603,000-barrel draw.
However, analysts also highlighted that U.S. gasoline and distillate inventories rose for the first time in more than a month, hinting at a cooling in fuel consumption.
Traders are also watching the approach of the November 21 deadline set by Washington for companies to halt business with Rosneft and Lukoil, Russia’s two largest exporters, which could further influence supply dynamics.