Oil stable as US demand worries offset Middle East tensions

Oil stabilized Thursday following a previous dip, as concerns over weakening fuel demand in the U.S., the largest oil consumer globally, balanced against escalating tensions in the Middle East.

The latest report from the U.S. Energy Information Administration (EIA) on Wednesday revealed that gasoline inventories declined less than anticipated, while distillate inventories unexpectedly rose, suggesting a slowdown in demand. [EIA/S]

John Evans from oil broker PVM commented, “It doesn’t paint a rosy picture of domestic demand in the U.S.” He emphasized the significance of U.S. economic data due later in the day for market sentiment. “Oil prices today will be influenced by factors beyond the oil market,” he noted.

Brent crude futures climbed 29 cents, or 0.3%, to reach $88.31 a barrel at 0805 GMT, while U.S. West Texas Intermediate crude futures saw a 25-cent increase, or 0.3%, reaching $83.06.

The EIA report revealed a significant and unexpected decline in U.S. crude inventories last week, accompanied by a notable increase in exports.

Concerns regarding U.S. fuel demand have emerged alongside indications of a slowdown in U.S. business activity for April. Additionally, stronger-than-anticipated inflation and employment figures suggest a potential delay in expected interest rate cuts by the Federal Reserve.

Later on Thursday, U.S. economic data includes the first-quarter economic growth report. Economists surveyed by Reuters anticipate that gross domestic product (GDP) likely expanded at a 2.4% annualized rate.

Emril Jamil, senior oil analyst at LSEG Oil Research, attributed the recent weakness in benchmark prices, following a test above $90 levels, to market sentiment shifting towards global economic headwinds over geopolitical tensions.

There are growing concerns that the conflict between Israel and Hamas in the Gaza Strip may escalate further. Israel is reportedly considering an assault on Rafah, located in the southern part of the enclave. This potential expansion of the conflict raises the risk of a broader war, which could disrupt oil supplies in the region.

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