US Inventory Increase Signals Weigh on Oil Prices; Iran Concerns Persist

Investing.com - Oil prices declined during Wednesday’s Asian trading session, cooling off after a strong rally earlier this week, as industry data showed an unexpected increase in U.S. oil inventories.

Cautious sentiment ahead of the Federal Reserve meeting later that day also added pressure, with markets worried that the Fed might signal a hawkish stance amid concerns that the Iran conflict, which has driven oil prices higher, could lead to persistent inflation.

However, crude oil prices remain generally optimistic, as markets bet that the U.S.-Israel conflict with Iran will continue to cause supply disruptions, with the conflict lasting over three weeks and showing little sign of easing.

As of 21:25 Eastern Time (01:25 Beijing Time), Brent crude futures fell 1% to $102.43 per barrel, and U.S. WTI crude futures dropped 1.2% to $94.14 per barrel.

Aside from the Fed, several other major central banks are also set to hold meetings this week.

U.S. Inventories Unexpectedly Rise — API Data

Data released Tuesday evening by the American Petroleum Institute (API) showed U.S. oil inventories increased by 6.6 million barrels last week, compared to an expected decrease of 600,000 barrels.

API data often precedes official U.S. inventory figures, which are scheduled to be released later Wednesday.

An increase in inventories typically indicates ample supply in the oil market, which is bearish for prices.

In addition to inventory data, the focus on Wednesday will be entirely on the conclusion of the Federal Reserve meeting, where the central bank is expected to keep interest rates unchanged.

Markets will be watching for the Fed’s outlook on interest rates amid rising inflation.

UAE May Assist U.S. in Protecting Strait of Hormuz, Iran Hostilities Continue

Reports suggest the United Arab Emirates may join U.S.-led efforts to protect shipping through the Strait of Hormuz, which has recently cooled oil price gains.

Iran has effectively closed all channels of the strait — which supplies at least 20% of the world’s oil — in retaliation for attacks by the U.S. and Israel.

The UAE could become the first country to respond to the U.S. call to safeguard the Strait of Hormuz, although most other U.S. allies have largely rejected President Donald Trump’s appeals for assistance in this route.

This week, Iran increased attacks on ships in the Strait of Hormuz and nearby waters, following U.S. and Israeli strikes on a key Iranian export terminal. Overnight reports indicated that Iran’s security chief, Ali Larijani, was killed in the Israeli attack — potentially sparking a fierce Iranian retaliation.

With ongoing Iran-related conflicts likely to continue disrupting supply, oil prices remain generally optimistic. Since the outbreak of war in late February, Brent crude has risen over 40%.

OCBC Bank analysts stated in a report that they expect oil prices to stay above $100 per barrel at least until mid-2026, as the Iran conflict continues to support crude prices with few signs of easing.

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