April 25, 2024 (MLN): Global oil prices ticked up on Friday due to low fuel demand in the U.S., which triggered concerns about demand, along with escalating tensions in the Middle East.
Brent crude traded near $87.13 per barrel, up by 0.22% on the day.
While West Texas Intermediate crude (WTI) was at $82.68 per barrel, up by 0.19% on the day.
Data from the U.S. Energy Information Administration (EIA) on Wednesday showed gasoline demand in the week to April 19 dropped 2.8% from a week earlier and is down 11% from a year ago. Distillate fuel demand also declined from a week ago and is down 4.7% from a year ago, as Reuters reported.
The falling fuel demand is occurring amid signs of cooling U.S. business activity in April and as stronger-than-
expected inflation and employment data means the U.S. Federal Reserve is more likely to delay expected interest rate cuts, weighing on economic sentiment.
"The current weakness in benchmark prices, after testing above $90 (a barrel) levels, is due to market sentiment refocusing on global economic headwinds over geopolitical tensions," said Emril Jamil, senior oil analyst at LSEG Oil Research.
Geopolitics aside, prices this quarter will be driven by factors including major producer supply cuts, economic data out of China and Eurozone, on top of incremental demand expectations as the Northern Hemisphere heads into summer amid expected tighter supply, said Jamil.
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A better indication of the Fed's rate intentions will be seen after U.S. gross domestic product and March personal consumption expenditure data is released on Thursday and Friday.
Fighting in the Gaza Strip between Israel and Hamas is expected to expand as Israel may start an assault on Rafah, in the enclave's south, which may increase the chances of a wider war that could potentially disrupt Middle East oil supplies.
However, there have been no other signs of direct conflict between Israel and Hamas-backer Iran, a major oil producer, since last week.
"Tensions between Iran and Israel have eased, but Israeli attacks on Gaza are expected to worsen, and the risk of conflicts spreading to neighbouring countries is underpinning 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 stockpiles decreased less than forecast.
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Posted on: 2024-04-25T11:03:26+05:00
