Oil prices were largely unchanged on Wednesday, with markets balancing a surprising rise in US gasoline stocks against concerns over slowing economic momentum and uncertainties surrounding OPEC+ production plans.

Brent crude futures settled slightly higher at US$72.83 a barrel, while US West Texas Intermediate crude edged down to US$68.72. The Energy Information Administration reported a 3.3-million-barrel increase in US gasoline inventories last week, significantly above analysts' expectations of a 46,000-barrel draw. Conversely, US crude stocks fell by 1.8 million barrels, far exceeding forecasts of a 605,000-barrel decline.

The data raised concerns about lacklustre fuel demand despite expectations for record Thanksgiving travel. Matt Smith, an analyst at Kpler, noted that implied demand has not shifted significantly despite the holiday period.Investors were also cautious as US inflation data indicated stubbornly high price pressures, limiting the Federal Reserve's scope for aggressive rate cuts in 2025. Market bets remain divided, with traders predicting a 25-basis-point rate cut in December but no changes in January or March. Higher borrowing costs could dampen economic activity and curb oil demand.

Meanwhile, geopolitical tensions eased after Israel and Hezbollah agreed to a ceasefire brokered by the US and France, effective Wednesday. However, analysts like Dennis Kissler of BOK Financial questioned the durability of the agreement, leaving markets wary of potential supply disruptions.

Support for oil prices came from OPEC+ discussions to delay a planned output increase scheduled for January. Sources within the group suggested that weaker global demand and rising production outside OPEC+ could necessitate an extension of current production cuts. A final decision is expected at the group's Dec 1 meeting.

Market sentiment was further shaped by comments from Goldman Sachs and Morgan Stanley, which both stated that oil prices remain undervalued due to supply deficits and potential disruptions, particularly involving Iranian exports under renewed sanctions risk when President-elect Donald Trump assumes office.

Increased US tariffs on Mexican and Canadian imports, including crude oil, also loom as a potential market disruptor. Analysts warned the proposed 25% tariffs could inflate costs for US refiners and consumers, putting additional upward pressure on oil prices.

Reuters