Following a period of volatility, oil prices leveled off in Asian trading on Wednesday as investors shifted their focus from easing Middle Eastern tensions to upcoming signs on the U.S. economy and interest rates. Data from the industry revealed an unexpected decrease in U.S. inventories, providing some support to crude prices. The weakening dollar, due to softer-than-expected U.S. purchasing managers index data, also contributed to the stability of oil prices. Brent oil futures for June delivery remained steady at $88.50 a barrel, while West Texas Intermediate crude futures edged up 0.1% to $83.46 a barrel by 20:50 ET (00:50 GMT). The American Petroleum Institute (API) reported on Tuesday that U.S. oil inventories fell by 3.2 million barrels in the week ending April 19, defying expectations of a 1.8 million-barrel increase. This reading suggests a potential tightening in U.S. markets, particularly given the approaching summer season, which typically sees increased travel and fuel consumption. A continued decline in gasoline inventories indicates that demand for fuel remains strong in the country, despite recent sharp increases in gas prices. However, analysts question how much further gas prices can rise, as the Biden administration considers high gas prices at the pump a significant concern. The market now awaits the release of first-quarter gross domestic product data from the U.S. on Thursday for further insights into the world’s largest fuel consumer. The data is also anticipated to influence the outlook for U.S. interest rates, as a strong economy provides the Federal Reserve more leeway to maintain higher interest rates for an extended period. The notion of prolonged higher interest rates was somewhat tempered by weaker-than-expected purchasing managers index data for April, which resulted in losses for the dollar on Tuesday. A weaker dollar benefits oil prices, as they are priced in the U.S. currency. The decline in the dollar also stimulates demand by making oil more affordable for international buyers. Later this week, additional signals on U.S. interest rates will be provided by the PCE price index data, the Fed’s preferred inflation gauge, which is set to be released on Friday. Oil prices have declined significantly from their six-month highs reached last week as investors grew more optimistic about a de-escalation of tensions between Iran and Israel. However, the ongoing conflict between Israel and Hamas raises the possibility that geopolitical risks in the Middle East could continue to impact crude markets.
Oil Prices Steady as Focus Shifts to US Economy, Interest Rates
