Oil falls nearly 3% as demand worries outweigh Middle East supply risks
- Brent futures for June were down $2.44, or 2.7%, to $87.58 a barrel
Oil prices slipped nearly 3% on Wednesday, pressured by a rise in U.S. commercial inventories rose, weaker economic data from China and U.S. progress on Ukraine and Israel aid bills.
Brent futures for June were down $2.44, or 2.7%, to $87.58 a barrel at 12:20 p.m. ET (1720 GMT), while U.S. crude futures for May were down $2.32, or 2.7%, at $83.00 a barrel. Both were on track for their biggest fall since March 20.
Oil prices have softened this week as economic headwinds curb gains from geopolitical tensions, with markets eyeing how Israel might respond to Iran’s weekend attack.
Analysts do not expect Iran’s unprecedented missile and drone strike on Israel to prompt dramatic U.S. sanctions on Iran’s oil exports.
“Oil prices go about their business of unwinding some of the war premium that has been priced in,” said John Evans at oil broker PVM.
U.S. crude inventories rose by 2.7 million barrels to 460 million barrels last week, government data showed, nearly double analysts’ expectations in a Reuters poll for a 1.4 million-barrel build.
Oil prices continued to decline after U.S. House of epresentatives Speaker Mike Johnson said the text of four bills providing assistance to Ukraine, Israel and the Indo-Pacific would be filed “soon today,” with a fourth with “other measures to confront Russia, China and Iran” posted later in the day.
“The market was waiting to sell off on indications of calming of tensions in the Middle East … progress on these bills and a three-day delay in Israel’s response to Iran is helping today,” said John Kilduff, partner at Again Capital LLC in New York.
Top Federal Reserve officials including Chair Jerome Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, dashing investors’ hopes for meaningful reductions in borrowing costs this year.
Britain’s inflation rate slowed by less than expected in March, signaling that a first rate cut by the Bank of England could also be further off than previously thought.
However, inflation slowed across the euro zone last month, reinforcing expectations for a European Central Bank rate cut in June.
In China, the world’s biggest oil importer, the economy grew faster than expected in the first quarter, but several other indicators showed that demand at home remains frail.
Elsewhere, Tengizchevroil announced plans for scheduled maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May.
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