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HomeLatestOil Prices Climb Amidst US Stock Decline and Escalating Middle East Conflict
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Oil Prices Climb Amidst US Stock Decline and Escalating Middle East Conflict

Oil prices continued their upward trajectory on Wednesday following unexpected data showing a decline in U.S. crude stocks last week, signaling positive demand trends. Concurrently, markets remained vigilant regarding escalating tensions in the Middle East.

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Brent crude futures saw a rise of 26 cents, or 0.29%, reaching $88.68 a barrel, while U.S. West Texas Intermediate crude futures climbed by 26 cents, or 0.31%, to $83.62 a barrel at 0634 GMT.

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According to sources citing figures from the American Petroleum Institute, U.S. crude inventories dropped by 3.237 million barrels in the week ending April 19, a stark contrast to the anticipated rise of 800,000 barrels forecasted by six analysts polled by Reuters. Market participants are eagerly awaiting official U.S. data on oil and product stockpiles at 10:30 a.m. EDT (1430 GMT) for validation of this significant drawdown.

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In parallel, U.S. business activity experienced a slowdown in April, reaching a four-month low, as indicated by S&P Global’s flash Composite PMI Output Index, which tracks the manufacturing and services sectors. The index fell to 50.9 this month from 52.1 in March, potentially signaling the necessity for rate cuts to prop up the economy, as noted by ANZ analysts.

Expectations of U.S. interest rate cuts could stimulate economic expansion and subsequently bolster demand for oil, especially from the world’s leading consumer of the fuel.

Despite these economic factors, analysts remain bullish, anticipating that any developments in the ongoing conflicts in the Middle East will continue to support markets, although the current impact on oil supplies remains contained.

Heng Koon How, the head of markets strategy for United Overseas Bank (UOB) in Singapore, commented, “Overall, crude oil prices are well supported around current levels by ongoing Middle East risk premiums. On the topside, the risk of possible renewed OPEC production increase from June will help limit any significant upside.

We maintain our forecast for Brent to consolidate at USD 90/bbl by the end of this year,” Heng added.

Meanwhile, Israeli airstrikes intensified across Gaza on Tuesday, marking some of the most intense shelling in weeks. ING analysts highlighted recent reports indicating that both Iran and Israel perceive the current operations against each other as concluded, with no immediate follow-up actions required. Additionally, they noted preparations in the U.S. and Europe for new sanctions against Iran, although the immediate impact on oil supply may be limited.

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