Several factors, including supply and demand policies, international events, and others, interact with each other to determine global oil prices, making them volatile and susceptible to rapid market changes. In the past few hours, oil prices have risen slightly, showing signs of another contraction in U.S. inventories, despite uncertainty regarding the timeline for interest rate cuts by the U.S. Federal Reserve following Chairman Jerome Powell's testimony before Congress.
Brent crude prices have increased to about $85 per barrel, after falling more than 3% in the last three sessions. Meanwhile, West Texas Intermediate crude prices dropped to below $82. The American Petroleum Institute reported that U.S. crude inventories shrank by 1.92 million barrels last week, with a decline also noted at the key Cushing hub in Oklahoma, according to sources familiar with the data. Total oil holdings fell by more than 12 million barrels in the previous week.
OPEC's crude oil production remained steady for the third month in June, while some key members continued to pump oil above agreed quotas. Oil prices remain high throughout the current year, supported by "OPEC+" supply cuts, along with expectations of a more accommodative U.S. monetary policy. Powell mentioned on Tuesday that while he was monitoring signs of weakness in the labor market, policymakers still wanted to see more evidence of slowing inflation before cutting interest rates.
Recent crude oil trading has seen a decrease in volatility. Implied volatility for Brent crude, which reflects expectations of potential movements in oil futures pricing linked to options pricing, is close to its lowest level in nearly six years. Traders are expected to review the monthly report from the Organization of the Petroleum Exporting Countries (OPEC) later today for more insights into global market forecasts, with the International Energy Agency's projections set to be released tomorrow, Thursday.