Oil Prices Rise as US Crude Stocks Decline, Middle East Tensions Continue
In a surprising turn of events, oil prices continued to climb on Wednesday as industry data revealed a drop in US crude stocks last week, signaling a positive outlook for demand. However, amidst the rise, markets remained vigilant of escalating hostilities in the Middle East, as reported by Reuters.
Market Movement
Brent crude futures saw an increase of 0.29 percent, rising by 26 cents to $88.68 a barrel, while US West Texas Intermediate crude futures climbed by 0.31 percent, reaching $83.62 a barrel by 9:34 a.m. Saudi time.
US Crude Inventories
According to sources citing American Petroleum Institute figures, US crude inventories dropped by 3.237 million barrels in the week ending April 19, contrary to the expectations of a rise of 800,000 barrels by six analysts polled by Reuters. The official US data on oil and product stockpiles is eagerly awaited at 5:30 p.m. Saudi time for confirmation of this significant drawdown.
Market Outlook
Despite a cooling of US business activity to a four-month low in April, with the S&P Global Composite PMI Output Index falling to 50.9 from 52.1 in March, analysts believe that rate cuts may be necessary to support the economy and stimulate demand for oil.
Middle East Tensions
While the impact on oil supplies remains limited for now, ongoing conflicts in the Middle East are anticipated to keep supporting markets. Israeli strikes intensified in Gaza on Tuesday, but reports suggest that both Iran and Israel see the current operations as concluded, with no immediate follow-up actions needed.
Sanctions and Forecasts
The US and Europe are gearing up for new sanctions against Iran, though analysts believe these may not significantly affect oil supply in the short term. Looking ahead, forecasts predict Brent to consolidate at $90/barrel by the end of the year, with the possibility of OPEC production increase in June limiting substantial upside.