Oil prices remain steady in Asian trade on Wednesday, stabilizing after recent fluctuations as attention turns from easing tensions in the Middle East to upcoming indicators on the U.S. economy and interest rates.
Crude prices received a boost from industry data that revealed an unexpected decrease in U.S. inventories. Additionally, the dollar’s weakness following disappointing U.S. purchasing managers index data also contributed to the support.
Brent oil futures for June remained stable at $88.50 per barrel, while West Texas Intermediate crude futures saw a slight increase of 0.1% to $83.46 per barrel at 20:50 ET (00:50 GMT).
According to the American Petroleum Institute, U.S. oil inventories experienced a decrease of 3.2 million barrels during the week ending April 19. This defied predictions of an increase of 1.8 million barrels.
The reading typically signals a similar pattern in official inventory data, expected later on Wednesday, suggesting some tightening in U.S. markets as the travel-heavy summer season approaches.
The continuous decline in gasoline inventories suggests that fuel demand in the country is still robust, despite the recent sharp increase in gas prices.
However, analysts are skeptical about the extent to which gas prices will increase, considering that the Biden administration strongly opposes high gas prices at the pump.
Markets were eagerly anticipating the release of first-quarter gross domestic product data from the U.S., scheduled for Thursday. This data will provide further insights into the world’s largest fuel consumer.
The reading is also anticipated to be connected to the outlook for U.S. interest rates, as a strong economy provides the Federal Reserve with more flexibility to maintain higher interest rates for an extended period.
The credibility of this idea was slightly undermined by the disappointing purchasing managers index data for April, leading to a decline in the value of the dollar on Tuesday. Oil prices benefit from a drop in the dollar since they are priced in the greenback.
The dollar’s weakness also supports increased demand as it lowers the cost of oil for buyers around the world.
Additional cues on U.S. interest rates will be released later in the week, including the PCE price index data, which is the Fed’s preferred inflation gauge, scheduled for this Friday.
Oil prices experienced a significant decline from their recent six-month highs in the past week. This drop was influenced by the increasing belief that tensions between Iran and Israel would ease, causing traders to remove the risk premium from oil markets.
However, the ongoing Israel-Hamas conflict continues to pose risks for crude markets, indicating that the situation in the Middle East remains uncertain.
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