Oil: Marginally rising prices, US demand fears intensify – Economic Post

Oil prices were relatively unchanged on Thursday as fuel demand in the U.S., the world’s biggest oil user, eased amid signs of a slowing economy and worries about widening conflict in the key oil-producing region of the Middle East.

Brent crude futures were up 9 cents at $88.11 a barrel in early morning trading, after falling 0.5% in the previous session.

U.S. WTI crude futures for June delivery were up 7 cents at $82.88 a barrel, after falling 0.6 percent on Wednesday.

Data from the U.S. Energy Information Administration (EIA) on Wednesday showed gasoline demand in the week to April 19 fell 2.8 percent from a week earlier and 11 percent year-on-year. Demand for distillate fuels also fell from a week ago and was down 4.7% from a year ago.

The drop in fuel demand comes amid signs of a slowdown in US business activity in April and as stronger-than-expected inflation and employment data mean the Federal Reserve is more likely to delay expected rate cuts, weighing the economic climate.

“The current weakness in benchmark prices, after testing above the $90 (barrel) levels, is due to market sentiment refocusing on global economic headwinds due to geopolitical tensions,” said Emril Jamil, senior analyst of oil at LSEG Oil Research.

Beyond geopolitics, prices this quarter will be affected by factors such as supply cuts by major producers, economic data from China and the Eurozone, in addition to expectations of increased demand as the Northern Hemisphere heads into summer amid expected limited supply, Jamil added.

A better indication of the Fed’s interest rate intentions will come after the release of US GDP and personal consumer spending data for March on Thursday and Friday.

Israel’s war in the Gaza Strip is set to widen as Israel has launched an offensive on Rafah, south of the enclave, where hundreds of thousands of Palestinians have been displaced. Such an attack could raise the chances of a wider war that could disrupt oil supplies in the Middle East. However, there have been no further signs of immediate conflict between Israel and Hamas-backed Iran.

“Tensions between Iran and Israel have eased, but Israeli attacks on Gaza are expected to intensify and the risk of conflict spreading to neighboring countries is supporting oil prices,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

Other EIA data on Wednesday showed U.S. oil inventories unexpectedly fell last week as exports jumped, while gasoline inventories fell less than forecast.

Crude inventories fell 6.4 million barrels to 453.6 million barrels, according to the EIA, compared with expectations in a Reuters poll for a rise of 825,000 barrels.