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Oil prices experienced a slight decline in Asian trading on Wednesday, driven by indications of a significant weekly increase in U.S. inventories, signaling less constrained markets. However, concerns persisted regarding Israel’s potential response to an attack by Iran.
The recent surge in crude prices over the past two weeks, fueled by escalating tensions in the Middle East, particularly between Iran and Israel, had sparked speculation of potential disruptions to regional oil supplies. However, this rally has slowed in recent sessions due to the strengthening dollar and apprehensions about weak economic conditions affecting oil demand in 2024.
Brent oil futures dipped by 0.1% to $89.89 a barrel, while West Texas Intermediate crude futures edged down by 0.2% to $84.69 a barrel. Both contracts were trading below the five-month highs reached last week.
According to data from the American Petroleum Institute (API), U.S. crude inventories surged by 4.09 million barrels in the week ending April 12, significantly exceeding expectations for a build of 600,000 barrels. This build, driven by record-high U.S. production exceeding 13 million barrels per day, offset rising refinery activity, raising concerns about the tightness of U.S. oil markets.
Despite the inventory build, a decline of approximately 2.5 million barrels in gasoline inventories suggested an uptick in demand, particularly with the onset of the summer season, indicating resilience in the world’s largest fuel consumer.
Market attention remained focused on escalating geopolitical tensions in the Middle East, although concerns about the impact of higher-for-longer interest rates on international demand, amid expectations of restrictive monetary policy, weighed on sentiment. Additionally, mixed economic data from China added to market apprehensions about demand.
Nevertheless, oil prices continued to be supported by fears of a deepening conflict in the Middle East potentially disrupting oil supply chains. All eyes were on Israel’s response to Iran’s recent drone and missile attack, with reports indicating imminent retaliation.
