Oil prices experienced a decline on Thursday following an increase in U.S. crude stockpiles and a strengthening dollar index. This setback comes after a previous day’s surge, primarily driven by escalating tensions in the Middle East.
At 0630 GMT, Brent crude futures saw a decrease of 67 cents, or 0.7%, settling at $89.46 per barrel. Simultaneously, U.S. West Texas Intermediate crude futures slipped by 71 cents, or 0.8%, reaching $84.68 per barrel.
While these benchmark oil contracts had risen nearly 2% on Wednesday, they retraced their gains after reports from the Wall Street Journal suggested a delay in Israel’s anticipated invasion of Gaza.
Tina Teng, a markets analyst at CMC, commented, “The movements in oil markets are heavily influenced by the ongoing Hamas-Israel conflict.”
Investors also had to grapple with the news of rising U.S. crude inventories, which pointed towards weakened demand. The Energy Information Administration reported a 1.4 million barrel increase in U.S. crude inventories, bringing the total to 421.1 million barrels. This surpassed the 240,000-barrel gain that analysts had expected according to a Reuters poll.
Citi analysts noted, “Markets remain volatile as Middle East tensions fluctuate, but the underlying fundamentals indicate seasonally weaker conditions than anticipated, with unexpectedly low product demand in the U.S.”
Data from the EIA revealed a decrease in refinery crude runs in the U.S. by 207,000 barrels per day. Additionally, refinery utilization rates dropped by 0.5 percentage points to 85.6% of total capacity.
Macroeconomic concerns have also cast a shadow on the outlook for oil demand. Euro zone business activity data took an unexpected downturn this month.
Moreover, the dollar index saw a slight increase on Thursday, adding further pressure on oil prices. A stronger dollar can reduce oil demand as it raises the cost of the commodity for those holding other currencies.
