Oil Prices Drop as Inventories Increase… Gold Prices Gain

**# Oil Prices Decline Due to Increased U.S. Stockpiles and Geopolitical Tensions** Oil prices fell on May 21, driven by rising U.S. oil inventories despite concerns over reports of Israel possibly targeting Iran’s nuclear sites. On the New York Mercantile Exchange (NYMEX), July West Texas Intermediate (WTI) crude dropped 46 cents (0.7%), settling at $61.57 per barrel. Similarly, Brent crude for July delivery fell 47 cents (0.7%), ending at $64.91 per barrel on the London ICE Futures Exchange. **# Rise in U.S. Oil Inventories** The U.S. Energy Information Administration (EIA) reported a 1.3 million barrel increase in U.S. crude stocks last week. Gasoline inventories rose by 800,000 barrels, while distillate stocks, including diesel and heating oil, increased by 600,000 barrels. **# Market Volatility Amid Israel-Iran Tensions** Initially, oil prices showed an upward trend following a CNN report indicating U.S. intelligence believes Israel is preparing to target Iran’s nuclear facilities. The report added that it remains uncertain if Israeli leadership has made a final decision to proceed. This geopolitical uncertainty added to the oil market's volatility, already affected by mixed signals regarding U.S.-Iran nuclear talks. Successful negotiations could reintroduce more Iranian crude to the market, raising oversupply fears, while an Israeli strike could disrupt talks and escalate Middle Eastern tensions, crucial to global oil supply. **# Analysts Downplay Impact of Potential Israeli Strike** Bjarne Schieldrop, Chief Commodities Strategist at SEB AB, remarked, “The market either perceives the likelihood of an Israeli strike as low or believes the price impact would be limited despite potential conflict in a key oil-producing region.” Oil prices’ subdued reaction suggests limited jitters. Phil Flynn, Senior Analyst at Price Futures Group, noted, “Current pricing reflects a diminished risk premium, expecting further peace negotiations.” Nonetheless, analysts warn of an Iranian retaliation scenario, possibly blocking the Strait of Hormuz, disrupting oil exports from Saudi Arabia, Kuwait, Iraq, and the UAE. Priya Walia, an analyst at Rystad Energy, forecasted, “Increased tensions could cause temporary trade flow disruptions or a supply shortfall of approximately 500,000 barrels per day. OPEC+ members are poised to react to these developments swiftly.” **# Gold Prices Hit One-Week High Amid Dollar Weakness and Geopolitical Risks** Gold prices surged to a one-week high as a weaker U.S. dollar and geopolitical uncertainties drove safe-haven demand. On the New York Commodity Exchange (COMEX), June gold futures increased by 0.9%, settling at $1,313.50 per troy ounce. Spot gold rose 0.7%, reaching $1,312.77 as of 2:55 a.m. Korean Standard Time on May 22. The U.S. Dollar Index, measuring the greenback against a basket of major currencies, dropped 0.6%, boosting gold’s attraction to investors. Daniel Pavilonis, Senior Market Strategist at RJO Futures, commented, “Gold prices are consolidating, waiting for new directional catalysts, including updates on trade and tariff negotiations.” A Reuters economist survey indicated ongoing U.S. economic weakness despite temporarily eased U.S.-China trade tensions. Additionally, CNN’s report on Israel’s potential strike on Iran bolstered interest in safe-haven assets like gold. These factors underscore the persistent impact of geopolitical uncertainties and economic conditions on commodity markets as investors strive to balance risk and safety.