Oil steady as demand woes offset Middle East fears

Oil was little changed on Wednesday after falling for three days as concerns about slowing European demand offset worries of Middle East supply disruptions stemming from the Israel-Hamas conflict in Gaza.

Brent crude futures edged higher by 6c to $88.13 a barrel by 3.45am GMT, while US West Texas Intermediate (WTI) crude futures were up 1c to $83.75 a barrel.

Eurozone business activity data took a surprise downturn this month, suggesting the bloc may slip into recession, creating a drag on the outlook for oil demand. Overall, the region’s oil refineries have been consuming less crude than a year ago amid lacklustre economic growth, Euroilstock data has shown.

Countries are pushing for a ceasefire in fighting between Israel and Hamas in the Gaza Strip so humanitarian aid could be delivered to besieged Palestinian civilians, and the leaders of the US and Saudi Arabia on Tuesday discussed efforts to prevent the conflict from widening to potentially include major producer Iran.

“Oil’s pullback has coincided with disappointingly softer European PMIs [purchasing managers’ index], suggesting at least some softening from the demand side, rather than being wholly attributable to war-related supply disruption threats being assuaged,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank, in a note.

“[It’s] certainly not sufficiently so to declare with any confidence that geopolitical risk premium associated with the Israel-Hamas conflict has meaningfully and durably dissipated,” Varathan said.

Crude prices may 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.

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

That went against eight analysts polled by Reuters who had estimated on average that crude inventories were up by about 200,000 barrels for the week.

Gasoline inventories dropped by 4.2-million barrels, while distillate inventories fell by about 2.3-million barrels, the API data showed.

US government data on inventories is due later on Wednesday.

Reuters