In early trade on Wednesday, oil prices saw a slight decrease as concerns over global demand weighed heavier than supply fears related to tensions in the Middle East. Brent futures for June delivery slipped by 7 cents to $89.16 a barrel, while U.S. crude futures for May delivery fell by 10 cents to $85.26 a barrel.
This week, oil prices have softened as economic uncertainties affected investor confidence, overshadowing geopolitical tensions. Investors are closely monitoring how Israel will respond to Iran’s recent attack on Israeli territory.
Hiroyuki Kikukawa, the president of NS Trading, noted that increased demand concerns are influenced by delayed U.S. interest rate cuts and weaker economic data from China. Despite previous market gains driven by supply worries in the Middle East, the restrained Iranian aggression has not spurred significant buying activity.
Looking ahead, Kikukawa predicted that WTI would likely trade within the range of $83-$88 without major developments. The Federal Reserve, acknowledging stronger-than-expected inflation data, believes it will require more time to ensure inflation aligns with its 2% target, as mentioned by Fed Chair Jerome Powell.
In China, though the economy expanded more than anticipated in the first quarter, various March indicators suggest weak domestic demand, impacting overall economic momentum. In the Middle East, Israel postponed a meeting to respond to Iran’s attack, while Western allies consider imposing new sanctions on Tehran to dissuade Israel from escalating tensions.
Despite Iran’s recent missile and drone strike on Israel, analysts suggest that significant sanctions on Iran’s oil exports by the Biden administration are unlikely, given concerns about oil prices and China’s role as a top oil buyer. U.S. crude oil inventories rose more than expected last week according to the American Petroleum Institute, although gasoline and distillates stockpiles decreased.
Official data from the Energy Information Administration is expected on Wednesday at 10:30 a.m.
