Oil Prices Dip Amid US Inventory Build and Iran Nuclear Talks Uncertainty

Oil prices slipped further in Asian trading Thursday, pressured by a surprise build in U.S. crude inventories and growing concerns over a potential oversupply. Brent crude futures for July delivery fell 0.5% to $64.61 per barrel, while West Texas Intermediate (WTI) dipped 0.4% to $61.30.

The decline followed a volatile prior session where oil briefly surged over 1.5% on reports from CNN suggesting Israel may be preparing for a strike on Iran’s nuclear facilities. Although Israeli leaders have not finalized any plans, the likelihood of military action has reportedly increased in recent months.

Adding to bearish sentiment, the U.S. Energy Information Administration (EIA) reported an unexpected 1.3 million-barrel increase in crude stockpiles for the week ending May 16, 2025. This brought total inventories to 443.2 million barrels, defying analyst forecasts for a similar-sized drawdown. Gasoline and distillate inventories also rose by 816,000 and 580,000 barrels, respectively, highlighting weakened demand.

A similar surprise build of 2.5 million barrels was noted earlier by the American Petroleum Institute (API), reinforcing concerns that supply is outpacing demand. Although the upcoming U.S. summer driving season post-Memorial Day could support consumption, current data suggests sluggish demand growth.

Meanwhile, attention shifts to the fifth round of U.S.-Iran nuclear negotiations set for May 23 in Rome, with Oman mediating. The talks center on Iran’s uranium enrichment, a key hurdle to lifting sanctions. Progress could potentially lead to increased Iranian oil exports, further adding to global supply, especially as OPEC+ has already ramped up production this month.

Traders remain cautious amid geopolitical tensions and oversupply risks, keeping oil prices under pressure despite occasional upward volatility.