Investing.com-- Oil prices fell in Asian trading on Wednesday after a nearly 1% drop in the previous session, as a U.S.-Russia agreement on a 30-day ceasefire in Ukraine’s energy sector and rising crude inventories heightened oversupply concerns.

Investors were also exercising caution as the Federal Reserve meeting was underway, where the central bank is expected to keep rates unchanged on Wednesday.

Brent Oil Futures expiring in May fell 0.4% to 70.25 per barrel as of 22:05 ET (02:05 GMT), while West Texas Intermediate (WTI) crude futures also dropped 0.4% to $66.48 per barrel.

Both contracts ended had risen sharply in early trade on Tuesday after Middle East tensions escalated, but closed nearly 1% lower after the temporary peace measures in Ukraine.

Putin, Trump agree to 30-day ceasefire on Ukraine energy sites

Russian President Vladimir Putin has agreed to a 30-day cessation of attacks on Ukrainian energy infrastructure, following a proposal by U.S. President Donald Trump.

This agreement aims to de-escalate tensions and protect critical energy assets in Ukraine, marking a potential step toward broader peace negotiations.

This temporary truce has introduced new dynamics into the global oil market, particularly concerning supply expectations.

If U.S.-Russia peace talks on Ukraine succeed, Washington could ease certain sanctions on Russian energy exports, either by relaxing restrictions on oil trade or allowing more exemptions for buyers. This would enable Russia to increase crude and refined product shipments.

Such prospects contribute to existing concerns about an oversupplied oil market, especially as other factors, like plans by OPEC+ to unwind production cuts starting in April, are already expected to add to global crude supplies.

US crude stocks surge above expected levels - API

The American Petroleum Institute (API) reported a significant increase in {{8849|U.S. crcrude oil inventories on Wednesday, with stocks rising by 4.593 million barrels for the week ending March 14.

This build exceeded analysts’ expectations, which had forecasted a much smaller increase of 1.170 million barrels.

This marks the second consecutive week of substantial inventory builds, following a 4.247 million-barrel increase reported in the previous week.

Market participants often view rising inventories as a bearish signal, reflecting either an oversupplied market or a slowdown in demand.

Traders will be closely monitoring upcoming reports from the U.S. Energy Information Administration (EIA) for further confirmation of these inventory trends.

Middle East tensions cap losses

After nearly two months of ceasefire, Israeli airstrikes targeted the Gaza Strip on Wednesday, resulting in over 400 fatalities, according to Palestinian health authorities.

Israeli Prime Minister Benjamin Netanyahu stated that this offensive is "just the beginning," indicating further turmoil in the region.

Additionally, the U.S. administration vowed last week to continue airstrikes against Yemen’s Iran-backed Houthi until they ceased their attacks on U.S. ships and drones.

The heightened conflict has raised concerns over potential disruptions to vital shipping routes in the Red Sea, leading to a notable impact on global oil markets.

The Middle East region plays a pivotal role in global energy markets, and heightened tensions can lead to concerns about potential disruptions.​