By Nicole Jao
NEW YORK (Reuters) -Oil prices fell on Wednesday as concerns about the conflict in the Middle East eased and business activity slowed in the United States, although a drop in U.S. crude inventories put a floor on those losses.
futures fell 40 cents, or 0.45%, to settle at $88.02 a barrel, while U.S. West Texas Intermediate crude futures fell 55 cents, or 0.66%, to $82.81.
That erased some of Brent’s gains earlier in the week, buoyed by a weaker U.S. dollar. [USD/]
“It seems like the fundamentals we’re trading with are leaning toward a bit of a Middle East presence,” said Tim Snyder, an economist at Matador Economics.
The perceived de-escalation between Iran and Israel could remove another $5-10 per barrel in the coming months, Goldman Sachs analysts said in a note. These analysts estimate a ceiling of $90 per barrel for Brent.
U.S. crude inventories fell 6.4 million barrels to 453.6 million barrels in the week ended April 19, the EIA said, compared with analysts’ expectations in a Reuters poll for a rise of 825,000 barrels.[EIA/s]
The high demand for crude oil was due to very high crude oil exports, said UBS analyst Giovanni Staunovo. But it could be a one-off incident, he said, as preliminary tanker tracking data shows lower exports this week.
U.S. business activity cooled to a four-month low in April, with S&P Global saying Tuesday that the flash Composite PMI Output Index, which tracks manufacturing and services sectors, fell to 50.9 this month from 52.1 in March.
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The US central bank is expected to start cutting interest rates this year, which could boost economic growth and in turn boost oil demand.
Elsewhere, German business morale improved more than expected in April, a survey showed on Wednesday, raising hopes that the worst might be over for Europe’s biggest economy.
Even as concerns about geopolitical tensions in the Middle East ease, the Israeli-Hamas conflict continued to rage on Tuesday with some of the heaviest shelling in weeks. Sources said on Wednesday that Israel is preparing to evacuate Rafah ahead of a promised attack on the city.
