Oil prices rise with the prospect of the US replenishing strategic reserves

By Yuka Obayashi

TOKYO (Reuters) – Oil prices rose on Thursday on the prospect that the United States could start buying oil for its oil reserves, after prices fell to a seven-week low on hopes of a ceasefire. -fire between Israel and Gaza, doubts about US interest rate cuts and increased oil stocks.

After three days of losses, Brent crude futures for July gained 21 cents, or 0.3%, to $83.65 a barrel by 00:26 GMT. West Texas Intermediate (WTI) crude oil for June rose 22 cents, or 0.3%, to $79.22 a barrel.

Both benchmarks fell more than 3% on Wednesday to their lowest level in seven weeks.

“The oil market has been supported by speculation that if WTI falls below $79, the US will move to increase its strategic reserves,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

The US aims to replenish its Strategic Petroleum Reserve (SPR) after a historic sale of emergency reserves in 2022 and wants to buy back oil at $79 per barrel or less.

“If a ceasefire is agreed, even temporarily, in the Gaza conflict, market interest will likely shift to oil demand in the US, where the driving season approaches,” Kikukawa said.

In the Middle East, expectations grew that a ceasefire agreement between Israel and Hamas could be in sight, following a new push led by Egypt.

Still, Israeli Prime Minister Benjamin Netanyahu has vowed to press ahead with a long-promised attack on the southern Gaza city of Rafah, despite the US stance and a UN warning that it would lead to “tragedy”.

The US Energy Information Administration (EIA) said crude oil inventories rose 7.3 million barrels to 460.9 million barrels in the week ended April 26, compared with analysts’ expectations in a Reuters poll of a draw of 1.1 million barrels.

Crude oil inventories have reached their highest point since June, the EIA said. [EIA/S]

Meanwhile, the US Federal Reserve held interest rates steady on Wednesday and signaled it is still leaning toward eventual reductions in borrowing costs, but put out a warning sign on recent disappointing inflation readings.

The Fed’s latest policy statement noted that “inflation has declined.” Any delay in rate cuts could slow economic growth and reduce oil demand.

(Reporting by Yuka Obayashi; Editing by Sonali Paul)