PRICE OF OIL – Singapore. As worries over an escalating conflict in the vital Middle East producing region clashed with declining gasoline demand in the United States, the world’s largest oil consumer, amid indications of a weakening economy, oil prices were hardly altered on Thursday.
After dropping 0.5% the previous day, Brent crude futures rose 9 cents to $88.11 a barrel at 0420 GMT. June U.S. West Texas Intermediate oil futures increased 7 cents to $82.88 a barrel after declining 0.6% on Wednesday. The U.S. Energy Information Administration (EIA) released data on Wednesday that indicated gasoline demand fell 11% from a year ago and 2.8% from a week prior. Demand for distillate fuel fell 4.7% from a year ago and likewise from a week ago.
The U.S. Federal Reserve is more likely to postpone anticipated interest rate reductions, which will negatively impact economic confidence, and the declining fuel consumption coincides with indications of slowing U.S. business activity in April. Senior oil analyst Emril Jamil of LSEG Oil Research stated, “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.” Apart from geopolitics, large producer supply reductions, economic data from China and the Eurozone, as well as increased demand expectations as the Northern Hemisphere enters summer with anticipated tighter supply, will influence prices this quarter, according to Jamil.
After the March personal consumption expenditure and U.S. gross domestic product figures are announced on Thursday and Friday, a more accurate picture of the Fed’s rate plans will become clearer. As Israel may launch an attack on Rafah, in the south of the enclave, fighting between Israel and Hamas in the Gaza Strip is predicted to intensify, raising the possibility of a larger conflict that might jeopardize Middle Eastern oil supplies. Since last week, though, there have been no more indications of direct hostilities between Israel and Iran, a key oil producer that supports Hamas.
Analyst Toshitaka Tazawa of Fujitomi Securities Co Ltd. stated, “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.” Other EIA data released on Wednesday revealed that while gasoline stocks declined less than expected last week, U.S. oil inventories unexpectedly fell as exports increased. The EIA reported a 6.4 million barrel decline in crude stocks to 453.6 million barrels, whereas a Reuters poll had predicted an 825,000 barrel increase.