Oil remains stable as the market considers Middle East war dangers and US demand worries
At 0420 GMT, Brent oil futures increased by 9 cents to $88.11 a barrel, following a 0.5% decline in the previous session.
The decline in gasoline consumption coincides with indications of a slowdown in US corporate activity in April, as well as stronger-than-expected statistics on employment and inflation, which raises the possibility that the US Federal Reserve may postpone its planned interest rate reductions and dampens investor confidence.
Thursday saw little movement in oil prices as worries over escalating instability in the major Middle East producing area clashed with declining gasoline consumption in the US, the world's largest oil consumer, amid indications of a weakening economy.
At 0420 GMT, Brent oil futures increased by 9 cents to $88.11 a barrel, following a 0.5% decline in the previous session.
After falling 0.6% on Wednesday, US West Texas Intermediate oil futures for June increased by 7 cents to $82.88 a barrel.
According to data released by the US Energy Information Administration (EIA) on Wednesday, demand for gasoline fell 2.8% from the previous week and 11% from the same period last year in the week ending April 19. The demand for distillate fuel has decreased from a week ago and from a year ago by 4.7%.
The US Federal Reserve is more likely to postpone anticipated interest rate decreases due to stronger-than-expected inflation and job statistics, which is dragging on economic optimism. The declining gasoline consumption is happening amid indications of softening U.S. corporate activity in April.
According to Emril Jamil, senior oil analyst at LSEG Oil Research, "market sentiment is refocusing on global economic headwinds over geopolitical tensions, which is the reason for the current weakness in benchmark prices, even after they tested above $90 (a barrel) levels."
Apart from geopolitics, large producer supply cutbacks, economic data from China and the Eurozone, as well as additive demand expectations as the Northern Hemisphere enters the summer season amid anticipated tighter supply, will all influence prices this quarter, according to Jamil.
Following the publication of the March PCE and US GDP figures on Thursday and Friday, a clearer picture of the Fed's rate plans will be seen.
Israel's possible attack on Rafah, in the southern enclave, might lead to further fighting between Israel and Hamas in the Gaza Strip and raise the possibility of a larger conflict that could possibly affect Middle Eastern oil supplies. But since last week, there have been no more indications of a direct confrontation between Iran, a significant oil producer and supporter of Hamas, and Israel.
According to Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd., "tensions between Iran as well as Israel have eased, but Israeli attacks on Gaza are expected to worsen and the risk of wars spreading to neighboring countries is underpinning oil prices."
Additional EIA data released on Wednesday revealed that although gasoline stocks declined less than anticipated last week, US oil inventories unexpectedly dropped as exports increased.
According to the EIA, crude inventories fell by 6.4 million barrels to 453.6 million barrels, whereas a Reuters poll had predicted an increase of 825,000 barrels.
