Oil Prices Fall as Stockpiles Climb and Middle East Tensions Ease
Rising Stockpiles and Decreased Demand Lead to Oil Price Decline
Oil prices experienced a decline on Thursday due to an increase in stockpiles and a decrease in demand. This came after a previous jump in prices driven by tensions in the Middle East. Futures for oil dropped by 67 cents, or 0.7%, to $89.46 a barrel, while U.S. West Texas Intermediate crude futures fell 71 cents, or 0.8%, to $84.68 a barrel.
Israel’s Delay in Gaza Invasion Impacts Oil Markets
The benchmark oil contracts had settled nearly 2% higher the previous day but were impacted by a report from the Wall Street Journal stating that Israel has agreed to postpone its expected invasion of Gaza. Tina Teng, markets analyst at CMC, explains, “The movements of oil markets are primarily involved with the Hamas-Israel war.”
Rise in U.S. Crude Inventories Indicates Weak Demand
Investors were also taking into account the rise in U.S. crude inventories, which suggests a decrease in demand. According to the Energy Information Administration, U.S. crude inventories increased by 1.4 million barrels in the latest week to 421.1 million barrels. This exceeded the expected gain of 240,000 barrels predicted by analysts from a Reuters poll. Citi analysts commented on the situation, stating, “Markets remain volatile as Middle East jitters ebb and flow, but underlying fundamentals are seasonally weaker than expected with product demand in the U.S. surprisingly weak.”
Macroeconomic Concerns and Dollar Strength Impact Oil Demand
The outlook for oil demand was further influenced by macroeconomic concerns, as euro zone business activity data experienced an unexpected downturn this month. Additionally, the slight increase in the dollar index put pressure on oil prices. This is because a stronger dollar makes oil more expensive for those holding other currencies, leading to a decrease in demand.
In conclusion, recent developments such as rising stockpiles, weak demand, and geopolitical tensions in the Middle East have contributed to the decline in oil prices. The oil market remains sensitive to these factors, and investors will continue to monitor the situation closely.
