Oil prices drop over concerns of weak US demand after unexpected inventory rise
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Oil Prices Dip Amid U.S. Supply Surplus and Middle East Tensions
Oil prices experienced a downturn in early Asian trade on Thursday, influenced by an unexpected increase in U.S. stockpiles, which raised concerns about sluggish demand in the world's largest oil consumer. Despite this, fears that an escalating Gaza conflict might disrupt supplies from the Middle East helped to limit the decline.
Market Movements
Brent crude oil futures decreased by 30 cents, or 0.4%, settling at $84.17 per barrel by 0028 GMT. Similarly, U.S. West Texas Intermediate crude futures fell by 32 cents, or 0.4%, to $80.58 per barrel. Both benchmarks had seen slight gains the previous day.
Factors Influencing the Market
The market responded to news of a U.S. crude oil and gasoline inventory surge with concerns over weakening demand. Tsuyoshi Ueno, a senior economist at NLI Research Institute, noted, "An expected increase in U.S. inventories of crude oil and gasoline are weighing on the market due to fears of weakening demand." However, he also highlighted the market's "tug-of-war" situation, supported by the potential escalation of conflict between Israel and Hezbollah, which might disrupt oil supply.
U.S. Stockpile Data
The U.S. Energy Information Administration (EIA) reported a surprising 3.6 million barrel increase in the nation’s crude oil stocks last week, contrary to analysts' expectations of a 2.9 million-barrel drawdown. Moreover, U.S. gasoline stocks rose by 2.7 million barrels against the anticipated 1 million-barrel draw. The product supplied for motor gasoline, used as a proxy for demand, diminished by approximately 417,000 barrels per day to 8.97 million bpd last week, with the four-week average falling about 2% compared to the previous year.
Middle East Conflict
The situation in the Middle East continues to be tense, with increasing cross-border clashes between Israel and Lebanon’s Hezbollah over recent weeks, raising the specter of a full-scale conflict that might involve major regional players, such as oil-rich Iran. Turkish President Tayyip Erdogan expressed solidarity with Lebanon and called for regional support.
On the ground, Israeli forces conducted assaults across several parts of Gaza on Wednesday, with residents reporting intense fighting in Rafah, located in the southern area of the Palestinian territory.
