After falling in the previous session, oil prices recovered on Thursday as the market assessed retreating fuel demand in the United States, the world’s largest oil consumer, alongside growing conflict risks in the Middle East, a crucial oil-producing region. Brent crude futures registered a slight increase of 18 cents, or 0.2%, to $88.20 per barrel by 0630 GMT, while US West Texas Intermediate crude futures gained 13 cents, or 0.2%, to $82.94 per barrel. Data released on Wednesday by the US Energy Information Administration (EIA) revealed that gasoline stockpiles experienced a smaller than anticipated decrease while distillate inventories grew unexpectedly, signaling signs of slowing demand. This decline in fuel demand coincides with indications of cooling business activity in the US in April. Moreover, stronger-than-expected inflation and employment data raise the likelihood that the US Federal Reserve will postpone anticipated interest rate cuts, weighing on economic sentiment. Senior oil analyst at LSEG Oil Research, Emril Jamil, remarked that the recent weakness in benchmark prices, following their testing above $90 per barrel, is attributable to a market sentiment shift towards global economic headwinds taking precedence over geopolitical tensions. Amid continued geopolitical concerns, Jamil emphasized that prices in the current quarter will be primarily driven by factors such as supply cuts from major producers, economic data from China and the Eurozone, and incremental demand expectations as the Northern Hemisphere enters summer with anticipated tighter supply. The release of US gross domestic product and March personal consumption expenditure data on Thursday and Friday, respectively, is expected to provide clearer insights into the Fed’s intentions regarding interest rates. Meanwhile, the ongoing conflict between Israel and Hamas in the Gaza Strip is anticipated to escalate as Israel considers an offensive on Rafah in the enclave’s south, increasing the risk of a wider war that could potentially disrupt oil supplies. However, there have been no indications of direct conflict between Israel and Hamas-backer Iran, a major oil producer, since last week. Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, noted that while tensions between Iran and Israel have subsided, escalating Israeli attacks on Gaza and the potential risk of conflicts spreading to neighboring countries remain supportive of oil prices. Additional EIA data released on Wednesday indicated a substantial 6.4 million barrel drop in crude stocks to 453.6 million barrels, contrasting expectations of an 825,000-barrel increase based on a Reuters poll.
Oil Prices Steady Amid Easing US Demand, Geopolitical Tensions in Middle East
