Brent holds steady above $88

London — Oil benchmark Brent held above $88 on Wednesday as the concern about war escalating in the Middle East offset demand worries stemming from gloomy economic prospects in Europe.

Brent crude futures were up 11c to $88.18 a barrel at 9.48am GMT, while US West Texas Intermediate crude futures slipped 5c to $83.69 a barrel.

Countries are pushing for a pause or ceasefire in fighting between Israel and Hamas in the Gaza Strip so that humanitarian aid can be delivered to besieged Palestinian civilians.

Meanwhile, US and Saudi Arabia leaders on Tuesday discussed efforts to prevent the conflict from widening to potentially include major oil producer Iran.

Elsewhere in Europe, a slew of recent manufacturing and services activity data has served as a reminder that glum macroeconomic indicators from some of the largest economies could dampen demand, said John Evans of oil broker PVM.

The data, he noted, “runs somewhat counter to the idea that oil will be free from bumps to the seasonal demand forecasted for this winter in the northern hemisphere”.

Growth indicators from industrial output data to PMI and sentiment readings in recent weeks are all suggesting that the eurozone’s economy is now either stagnating or even shrinking as weak external demand, consumer caution and high interest rates take their toll.

Bank lending across the eurozone came to a near standstill in September, European Central Bank data showed on Wednesday, providing further evidence that the 20-nation bloc was skirting a recession.

However, on the bright side, crude prices could find some support as the top parliament body in China, the world’s biggest oil importer, approved a bill to issue 1-trillion yuan ($137bn) in sovereign bonds and allow local governments to issue new debt from their 2024 quota to boost the economy.

But demand for crude oil in China could be limited as Beijing put a ceiling for its oil refining capacity at 1-billion metric tonnes by 2025 to streamline its vast oil processing sector and curb carbon emissions.

Falling crude oil stockpiles in the US, the world’s biggest oil consumer, are also supportive of prices. US inventories declined unexpectedly by about 2.7-million barrels in the week ended on October 20, according to market sources citing American Petroleum Institute figures on Tuesday.

Analysts polled by Reuters had estimated on average that crude inventories would go up by about 200,000 barrels for the week.

US government data on inventories is due later on Wednesday. 

Reuters