OIL prices fell about 3 per cent to a seven-week low on Wednesday on a surprise build in US crude stocks, the prospect of a Middle East ceasefire agreement and as hopes faded for near-term US interest rate cuts that could boost oil demand.

Brent futures for July delivery fell US$2.89, or 3.4 per cent, from where the July contract closed on Tuesday to settle at US$83.44 a barrel on Wednesday.

That was down about 5.0 per cent from where the Brent June contract closed on Tuesday when it was still the front-month, which would be the front-month’s biggest daily percentage decline since October 2023.

US West Texas Intermediate (WTI) crude fell US$2.93, or 3.6 per cent, to settle at US$79.00 a barrel.

Those were the lowest closes for both benchmarks since March 12 and left both in technically oversold territory for the first time since December 2023.

In other energy markets, US diesel futures closed at their lowest since July 2023, while US petrol settled at a seven-week low.

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The US Energy Information Administration (EIA) said energy firms added a surprise 7.3 million barrels of crude into stockpiles during the week ended April 26.

That compares with the 1.1 million barrel withdrawal analysts forecast in a Reuters poll and the 4.9 million barrel increase shown in data from the American Petroleum Institute (API), an industry group.

“The crude build is a big one. At this time of year, we should be drawing down on crude oil as more barrels go through the refinery,” Bob Yawger, director of energy futures at Mizuho, told Reuters.

EIA also reported a surprise 0.3-million barrel build in petrol inventories. Analysts expected gasoline stocks would decline by 1.1 million barrels.

In the Middle East, expectations grew that a ceasefire agreement between Israel and Hamas could be in sight following a renewed push by the US and Egypt. Still, Israeli Prime Minister Benjamin Netanyahu has vowed to go ahead with a long-promised assault on the southern Gaza city of Rafah.

“The crude market is weighed down by continued hopes for a ceasefire,” Ole Hansen of Saxo Bank said.

In other news, the US accused Russia of violating the international chemical weapons ban by deploying the choking agent chloropicrin against Ukrainian troops and using riot control agents “as a method of warfare” in Ukraine.

US interest rates

The US Federal Reserve held interest rates steady and signaled it is still leaning towards eventual reductions in borrowing costs, but put a red flag on recent disappointing inflation readings.

The Fed’s latest policy statement did note that “inflation has eased” but any delay in rate cuts could slow economic growth and dampen demand for oil. REUTERS