Oil prices held steady on Thursday after falling the day before, as indicators of declining gasoline consumption in the United States, the world’s largest oil consumer, competed with rising war threats in the major Middle Eastern producing area.
Brent crude prices rose 18 cents, or 0.2%, to $88.20 a barrel at 0630 GMT, while US West Texas Intermediate crude futures up 13 cents, or 0.2%, to $82.94 per barrel.
The U.S. Energy Information Administration (EIA) said on Wednesday that petrol stocks decreased less than expected, while distillate stockpiles grew despite predictions of a decline, indicating signals of decreasing demand. [EIA/S]
Falling fuel consumption coincides with signs of softening U.S. corporate activity in April, as stronger-than-anticipated inflation and job data suggests the Federal Reserve may delay projected interest rate decreases, impacting on economic morale.
“The current weakness in benchmark prices, after testing above $90 (a barrel) levels, is due to market sentiment refocusing on global economic headwinds over geopolitical tensions,” said Emril Jamil, senior oil analyst at LSEG Oil.
Aside from geopolitics, prices this quarter will be driven by variables such as big producer supply cutbacks, economic data from China and the Eurozone, as well as incremental demand expectations as the Northern Hemisphere enters summer with tighter supply, according to Jamil.
The publication of U.S. GDP and March personal consumption expenditure statistics on Thursday and Friday will provide a stronger sense of the Fed’s rate plans.
Meanwhile, combat between Israel and Hamas in the Gaza Strip is set to escalate as Israel prepares to launch an attack on Rafah in the enclave’s south, raising the prospect of a larger battle that might disrupt energy supplies.
However, there have been no more indications of direct violence between Israel and Hamas-supporting Iran, a major oil exporter, since last week.
“Tensions between Iran and Israel have eased, but Israeli attacks on Gaza are expected to worsen, and the risk of conflicts spreading to neighbouring countries is underpinning oil prices,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.