Crude oil prices started creeping up this week, with Brent and West Texas Intermediate futures both rising near a dollar-per-barrel. Some analysts immediately chalked up the increase to concerns about the lack of a peace deal between Russia and Ukraine, but others point to declining inventories in the U.S. “Overall, I think the market has actually been betting on a peace deal, because we’ve seen recent weakness in prices,” says Phil Flynn, market analyst with the Price Futures Group. “I think the reversal in prices this week is because the market is getting more optimistic about the demand side.”
This week’s crude oil increase coincided with new daily drama in the Russia-Ukraine saga, as President Trump pushes for a peace deal. But it also happened on the same day that U.S. crude oil stocks fell by more than 2.4 million barrels, signaling a rise in demand. Such a rise is a welcome sign to the industry, which has seen prices remain historically low in recent months due to a glut of supply on the market.
While an uptick in crude oil demand could mean slightly higher gas prices for drivers, Flynn notes it is also a positive sign for the overall economy. “For months, we’ve seen concerns in the oil market about weakening demand and a slowing economy, and today’s numbers show that was kind of a false narrative,” he says. “There was a lot of concern that President Trump’s tariffs were going to kill oil demand…I don’t think that’s true, and I think the market is starting to get that.”