Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS/Agustin Marcarian/File Photo
Oil prices experienced a decline of approximately 1% on Wednesday, attributed to reduced concerns regarding conflict in the Middle East and a slowdown in business activity in the world’s largest oil consumer. However, losses were mitigated by a decrease in U.S. crude oil inventories.
Brent crude futures dropped by 73 cents, or 0.83%, settling at $87.69 per barrel by 1:30 p.m. EDT (1730 GMT), while U.S. West Texas Intermediate crude futures fell by 84 cents, or 1.01%, to $82.52 per barrel. This reversal partially offset Brent’s earlier gains, which were supported by a weakening U.S. dollar.
Tim Snyder, an economist at Matador Economics, noted a perceived stabilization in the Middle East, influencing market fundamentals. Analysts at Goldman Sachs suggested that a potential de-escalation between Iran and Israel could lead to a further reduction in oil prices by $5-10 per barrel in the coming months, with a projected ceiling of $90 per barrel for Brent crude.
The Energy Information Administration (EIA) reported a significant decrease in U.S. crude stockpiles by 6.4 million barrels to 453.6 million barrels for the week ending April 19, contrary to analysts’ expectations of an 825,000-barrel increase. This decline was attributed to elevated crude exports, according to UBS analyst Giovanni Staunovo, although preliminary tanker tracking data indicates a potential decrease in exports.
In terms of economic indicators, U.S. business activity slowed in April, reaching a four-month low, as reported by S&P Global’s flash Composite PMI Output Index, which tracks the manufacturing and services sectors. However, expectations of U.S. interest rate cuts were seen as a potential stimulus for economic growth and oil demand.
Additionally, Germany’s business morale exceeded expectations in April, signaling potential recovery for Europe’s largest economy. Despite easing concerns about geopolitical tensions in the Middle East, the conflict between Israel and Hamas persists, with intensified shelling reported on Tuesday and preparations for an assault on Rafah by Israel.
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