Oil extends losses on easing Middle East tensions, slower US biz activity; Brent steady at $88/bbl

Brent crude futures were down 27 cents, or 0.31 per cent, to $88.15 a barrel, while US West Texas Intermediate crude futures fell 38 cents, or 0.46 per cent, to $82.98. That reversed some of Brent’s gains earlier in the week, buoyed by a weaker US dollar. Coming to domestic prices, crude oil futures last traded 0.49 per cent lower at ₹6,894 per barrel on the multi commodity exchange (MCX).

Also Read: Oil rises $1 as US dollar slips to one-week low, investors shift focus to global economy; Brent at $88/bbl

What’s dragging crude oil prices?

-Perceived de-escalation between Iran and Israel could remove another $5-10 a barrel in coming months, Goldman Sachs analysts said in a note. US crude stockpiles fell by 6.4 million barrels to 453.6 million barrels in the week ended April 19, said the Energy Information Administration (EIA).

-The large crude draw was the result of very high crude exports, said UBS analyst Giovanni Staunovo. But it could be a one off, he said, as preliminary tanker tracking data this week shows lower exports.

-US business activity cooled in April to a four-month low, with S&P Global saying on Tuesday that its flash Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 50.9 this month from 52.1 in March.

-US interest rate cuts could bolster economic growth and, in turn, stimulate demand for oil. Elsewhere, Germany’s business morale improved more than expected in April, according to a survey on Wednesday, boosting hopes that the worst may be over for Europe’s biggest economy.

-Even as concerns about geopolitical tension in the Middle East eased, the Israel-Hamas conflict continues to rage with some of the heaviest shelling in weeks on Tuesday. Sources on Wednesday said Israel is preparing to evacuate Rafah ahead of a promised assault on the city, according to StuffsEarth.

Also Read: India’s crude oil consumption up 4.6% in FY24, output rises marginally at 0.6%, imports steady: PPAC

Where are prices headed?

Steady moves are seen in oil prices so far in the sessions, as focus now turns on the U.S GDP data on Thursday and the PCE inflation on Friday – to understand the possible path on the US Fed’s policy on rate cuts, according to analysts.

‘’A weaker growth in the manufacturing/ services PMI has led to expectation that the US economy may be slowing, which would be supportive for early rate cuts. For crude oil… momentum looks little consolidative with resistance at 7,020/ 7,070, and support at 6,800/ 6,740,” said Pranav Mer, Vice President, EBG – Commodity & Currency Research, JM Financial Services Ltd.

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Published: 24 Apr 2024, 10:28 PM IST