Investing.com — Oil prices edged lower on Wednesday as easing tensions in the Middle East suppressed bets on supply disruptions and signs of weaker gasoline demand overshadowed a much bigger-than-expected drop in inventories.
At 2:30 PM ET (18:30 GMT), the price fell 0.7% to settle at $82.81 per barrel. fell 0.5% to $88.02 per barrel
US crude oil inventories are falling surprisingly sharply, but demand for gasoline is falling
Data from the US stock market showed on Wednesday that the US fell 6.4 million barrels in the week to April 19, confusing expectations for a rise of 1.6 million barrels.
The steep decline comes as refinery activity increased to 88.5%, compared to 88.1% a week earlier.
Product inventories were mixed with distillate inventories declining and gasoline inventories declining despite weaker demand.
“Subdued demand after a warmer-than-normal winter and weak economic growth have allayed concerns about supply shortages in global gas markets,” ANZ Research said in a note on Wednesday.
Gasoline demand fell to 8.4 million barrels per day from 8.7 million barrels per day the week before, the EIA said.
Tensions between Iran and Israel are easing
Oil prices fell sharply last week from a six-month high as the de-escalation of tensions between Iran and Israel caused traders to largely price out a risk premium in oil markets.
But the war between Israel and Hamas has shown little sign of ending, meaning some of the risks of Middle East geopolitics remain at play for crude markets.
US GDP data and PCE inflation data were expected
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Markets were now awaiting first-quarter US data, due on Thursday, and then Friday’s figures, the Fed’s favorite inflation gauge, for more information on the world’s biggest fuel consumer.
The figures are also expected to align with the outlook for US interest rates, as the strong economy gives the Federal Reserve more leeway to keep rates high for longer.
This idea was somewhat dented by weaker-than-expected April data, which led to losses in the dollar on Tuesday. A drop in the dollar is good for oil prices, as they are priced in the dollar.
The dollar’s weakness also helps boost demand by making oil cheaper for international buyers.
(Peter Nurse, Ambar Warrick contributed to this article.)
