Oil prices ticked up in Asian trading on Thursday after a sharp rally the prior session, underpinned by persistent geopolitical friction and signs of a tighter U.S. crude supply picture.
As of 22:40 ET (03:40 GMT), Brent futures for April delivery were trading at $70.59 per barrel, up 0.3%, while West Texas Intermediate (WTI) crude futures rose 0.4% to $65.45 per barrel. Both contracts had climbed by more than 4% - a move of over $3 - in the previous trading day.
Trading volumes remained subdued across Asian markets as several regional exchanges observed Lunar New Year holidays, keeping activity light.
Geopolitical drivers
Market attention stayed fixed on risks linked to the Middle East. Increasing tensions between Washington and Tehran have elevated concerns about potential interruptions to crude shipments passing through the Strait of Hormuz - a key chokepoint for global energy flows. Media accounts of increased military and naval activity in the Gulf have reinforced perceptions of supply vulnerability among traders.
At the same time, expectations that sanctions on Russian energy exports might ease diminished after no tangible progress emerged from recent Russia-Ukraine negotiations.
U.S. inventories tighten unexpectedly
Industry data supplied additional support to prices. The American Petroleum Institute reported that U.S. crude stocks fell by about 609,000 barrels in the week to Feb. 13. That result ran counter to a Reuters poll anticipating a build of 2.1 million barrels, and it reversed a prior week’s large increase of over 13 million barrels. The API’s draw is commonly interpreted as an indicator of either stronger refinery demand or constrained supply - both factors that tend to be bullish for oil prices.
Official confirmation from the Energy Information Administration was scheduled for later on Thursday.
Demand and monetary policy pressures
Despite the supply-side concerns, investors remained guarded over the outlook for global fuel demand and the potential impact of further monetary tightening in major economies. Minutes from the Federal Reserve’s latest policy meeting revealed a division among officials over whether additional interest rate increases might still be necessary. While policymakers generally agreed that inflation risks remained tilted to the upside, they differed on how restrictive policy should become and how long rates should remain elevated.
Market participants were awaiting the U.S. personal consumption expenditures price index - the Federal Reserve’s preferred inflation gauge - due on Friday for clearer guidance on the likely path of monetary policy and the implications for fuel consumption.
Outlook
With geopolitical tensions supporting sentiment and an unexpected industry-reported inventory draw tightening the U.S. supply picture, prices in the near term were bolstered. Nevertheless, low trading volumes and uncertainty about demand signals and central bank policy meant investors remained cautious.