Morning Highlights: Oil climbs as traders assess ceasefire durability, U.S. demand resilience

Crude prices edged higher early Wednesday, stabilizing after recent losses as investors evaluated the ceasefire between Israel and Iran and found fresh support in strong U.S. oil demand data and growing expectations for a U.S. interest rate cut.

Market snapshot (as of 6:30 a.m. EST):

• Brent (Aug): $67.76 (+$0.62)

• WTI (Aug): $64.98 (+$0.61)

Tuesday’s settlement marked the lowest for Brent since June 10 and for WTI since June 5—both before Israel launched a surprise strike on Iranian military and nuclear infrastructure. The escalation drove oil to five-month highs before prices reversed on news of a tentative U.S.-brokered ceasefire.

Ceasefire calm, but concerns persist

Markets are now digesting signs that both sides may be winding down hostilities. On Tuesday, Israel and Iran lifted civilian restrictions and signaled that the 12-day conflict—briefly joined by the U.S.—had likely concluded for now.

Still, ING analysts noted that “concerns regarding Middle Eastern supply have diminished, but not disappeared,” citing continued demand for prompt supply and lingering geopolitical risk.

U.S. inventory draw supports fundamentals

A drawdown in U.S. crude stockpiles also lent support. According to API data released Tuesday, crude inventories fell by 4.27 million barrels last week, suggesting demand remains firm in the world’s largest oil consumer.

Official government data from the EIA is due later today.

Fed rate cut expectations grow

Comments from Federal Reserve Chair Jerome Powell on Tuesday helped fuel hopes that a rate cut could arrive as early as July, with futures now pricing in nearly 60 basis points of easing by December. Lower interest rates typically stimulate economic activity and energy demand.

OANDA analyst Kelvin Wong noted that Powell’s testimony “has hinted at a slight chance of bringing forward the first rate cut of 2025 to July,” potentially helping put a floor under oil prices in the mid-$60s.

Geopolitical premium moderates, but hasn’t vanished

UBS analyst Giovanni Staunovo said the market is pricing out the worst-case scenario for now, but volatility may persist. A preliminary U.S. intelligence assessment revealed that airstrikes on Iranian nuclear sites only set back capabilities by a few months, highlighting how quickly tensions could flare again.

China’s energy security calculus may shift

The Israel-Iran conflict has reignited energy security concerns in Beijing, with reports that China may now reconsider its position on Russia’s Power of Siberia 2 gas pipeline. Long stalled over pricing and ownership concerns, the project’s appeal has reportedly grown in light of rising geopolitical risks in the Middle East, especially as nearly a third of China’s LNG imports come from the Gulf.