Oil prices rebound with Israel-Iran ceasefire; U.S. inventories fall

Investing.com-- Oil prices rose Wednesday, rebounding to a degree after falling sharply in the last two sessions as traders assessed the U.S.-brokered ceasefire between Israel and Iran. 

At 06:00 ET (10:00 GMT), Brent oil futures for August jumped 0.9% to $66.74 a barrel, while West Texas Intermediate crude futures rose 1% to $65.02 a barrel. 

Prices had plummeted to a near three-week low on Tuesday after U.S. President Donald Trump announced a ceasefire between Israel and Iran, helping quell some concerns over supply disruptions stemming from their conflict.

Israel-Iran ceasefire holds, for now

Oil markets were now watching for whether the ceasefire will hold, especially after Trump chided both countries for violating the truce shortly after it took effect on Tuesday.

But Israel and Iran appeared to have at least ceased their aerial strikes against each other by Wednesday morning. 

"While concerns regarding Middle Eastern supply have diminished for now, they have not entirely disappeared, and there remains a stronger demand for immediate supply," said analysts at ING, in a note.

The conflict in the Middle East hasn’t had any significant impact on oil flows from the Persian Gulf so far. Meanwhile, exports from Iran have surged.

The U.S. attacked over the weekend three nuclear sites in Iran with high-yield bunker busters, with a bulk of the damage reportedly done underground. 

A slew of reports, citing preliminary intel, said that U.S. strikes against Iran had not completely wiped out the country’s nuclear facilities, and had only set back the country’s nuclear aspirations by months.

But U.S. officials rejected these reports, maintaining their claims that the weekend strikes had “obliterated” Iran’s nuclear facilities. 

Elsewhere, the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, is due to hold a video conference on 6 July to consider a further supply boost in August.

U.S. inventories see another week of hefty draw - API 

Industry data signaling another week of bumper U.S. inventory draws also helped boost crude prices, as demand in the world’s biggest fuel consumer appeared to be picking up. 

The American Petroleum Institute reported on Tuesday that U.S. inventories shrank nearly 4.3 million barrels in the past week, much more than expectations for a draw of 600,000 barrels. 

This follows a bumper 10.1 mllion-barrel draw from the week before, pointing to rapidly tightening U.S. oil stockpiles.

The API data usually heralds a similar trend from official inventory data, which is due later on Wednesday.

Outsized draws in U.S. inventories helped spur some confidence in fuel demand, which was seen picking up sharply with the summer season.

Ambar Warrick contributed to this article