Oil Market Dips on High Stockpiles, Weaker Economic Data

By Adedapo Adesanya

The oil market slid by 3 per cent on Wednesday, pressured by a rise in US inventories, weaker economic data from China, and US progress on Ukraine and Israel aid bills.

As a result, Brent futures came down by $2.73 or 3 per cent to $87.29 a barrel, and the US crude futures deflated by $2.67 or 3.1 per cent to $82.69 a barrel.

Oil prices have softened this week as economic headwinds curb gains from geopolitical tensions, with markets eying how Israel might respond to Iran’s weekend attack.

Analysts do not expect Iran’s unprecedented missile and drone strike on Israel to prompt dramatic US sanctions on Iran’s oil exports.

Tensions remain contained as all parties have so far avoided a wider conflict that disrupts oil supply.

However on Wednesday, US crude inventories rose by 2.7 million barrels to 460 million barrels last week, government data from the US Energy Information Administration (EIA) showed compared with a significant build of 5.8 million barrels for the previous week and an estimated 4-million-barrel build for the week to April 12 as reported by the American Petroleum Institute (API) on Tuesday.

The EIA also reported declines in gasoline and middle distillates, which at the time of writing had not changed the direction of oil prices.

Oil prices continued to decline after US House of Representatives Speaker Mike Johnson said the arm of government is making progress on four bills providing assistance to Ukraine, Israel and the Indo-Pacific with a fourth to confront Russia, China and Iran.

Matters of interest rate also tempered with the market as US Federal Reserve officials dallied on when interest rates may be cut, dashing investors’ hopes for meaningful reductions in borrowing costs this year.

Britain’s inflation rate slowed by less than expected in March, signaling that a first rate cut by the Bank of England could also be further off than previously thought.

However, inflation slowed across the euro zone last month, reinforcing expectations for a European Central Bank (ECB) rate cut in June.

In China, the world’s biggest oil importer, the economy grew faster than expected in the first quarter, but several other indicators showed weakening demand.