The Impact of Middle East Tensions on Oil Prices
Oil prices experienced a decline on Wednesday due to reduced tensions in the Middle East, which dampened concerns of supply disruptions. Additionally, signs of weakened gasoline demand overshadowed a significant decrease in inventories.
Surprising Inventory Movements
The latest data from the US Energy Information Administration (EIA) revealed a surprising 6.4 million barrel decline in US crude inventories for the week ending April 19. This unexpected drop contradicted expectations of a 1.6 million barrel increase.
Despite the decline in crude inventories, gasoline demand also slipped, reflecting subdued consumer activity following a warmer winter and sluggish economic growth.
Market Dynamics and Geopolitical Trends
While tensions between Iran and Israel have eased, the ongoing conflict between Israel and Hamas continues to pose risks for Middle Eastern geopolitics and crude markets.
Traders have already priced out the risk premium associated with the previous tensions, leading to a decline in oil prices from their recent highs.
Upcoming Economic Indicators
Market participants are now awaiting the release of US GDP data on Thursday and the Personal Consumption Expenditures (PCE) inflation data on Friday. These reports will offer insights into the health of the US economy and its implications for interest rates.
Weakness in the dollar, as evidenced by recent economic data, can support oil prices by making them more affordable for international buyers.
(Additional reporting by Peter Nurse and Ambar Warrick)
