Oil Prices Rise, But Gains Limited by Unexpected Inventory Increase and Strong Dollar

Oil prices experienced modest gains on Wednesday, although these advances were limited by an unexpected rise in U.S. inventories and a stronger dollar.

As of 14:30 ET (18:30 GMT), Brent crude rose 0.28% to $85.28 per barrel, while West Texas Intermediate increased by 0.1% to settle at $80.90 per barrel.

### US Inventories See Unexpected Increase

Data from the Energy Information Administration revealed that domestic crude and gasoline stocks unexpectedly rose last week, contrary to expectations for a traditional summer decline in crude inventories. Reports indicated that U.S. oil inventories increased by approximately 3.6 million barrels for the week ending June 21, while a decline of 2.6 million barrels had been anticipated.

Additionally, gasoline supplies grew by about 2.7 million barrels, against forecasts for a decrease of 1.1 million barrels. Distillate inventories also missed expectations with a rise of 377,000 barrels instead of a projected drop of 1.5 million barrels.

### “Summer Peak” Achieved

Despite these developments, both crude contracts still maintained strong gains over the past two weeks, driven by ongoing geopolitical tensions, including Israeli strikes on Gaza and Ukrainian attacks on Russian refineries, which added a risk premium to oil prices. Analysts from Goldman Sachs pointed out that Brent crude prices have reached a “summer peak” of $86 per barrel. They also noted that robust U.S. summer travel activity and global jet demand continue to bolster the benchmark contract.

### Rate Concerns and Dollar Strength Limit Gains

However, despite the recent strength, concerns over high U.S. interest rates have restrained overall gains. This has led traders to favor the dollar, which remained near two-month highs amid signs of resilience in the U.S. economy, raising fears that the Federal Reserve could maintain elevated rates for an extended period.

This week’s focus is largely on key inflation data, which is vital for steering the Fed’s outlook on interest rates. Several Fed officials have issued hawkish warnings, and the continuous expectation of prolonged high rates has been a significant factor weighing on oil prices, as traders anticipate a slowdown in economic activity in the coming months.