On Wednesday, oil prices fell for a fourth day as worries about decreasing European demand outweighed Middle Eastern supply interruptions from the Israel-Hamas conflict in Gaza.
Compared to U.S. West Texas Intermediate crude prices, down 31 cents, or 0.4%, to $83.43 a barrel as of 0627 GMT, Brent crude futures were down 28 cents, or 0.3%, to $87.79 a barrel.
Data on corporate activity in the eurozone unexpectedly decreased last month, raising the possibility that the region may enter a recession and dimming the outlook for oil consumption. According to Euroilstock statistics, the region’s oil refineries have been using less crude overall than a year ago due to its lackluster economic development.
On Tuesday, the U.S. and Saudi Arabia’s leaders discussed efforts to prevent the conflict from escalating to potentially include major producer Iran. 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.
“Oil’s pullback has coincided with disappointingly soft softer European PMIs, suggesting at least some softening from the demand side, rather than being wholly attributable to war-related supply disruption threats being assuaged,” wrote 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,” said Varathan.
As China, the world’s largest oil importer, passes a law to sell 1 trillion yuan ($137 billion) in sovereign bonds and let local governments issue fresh debt from their 2024 allotment to bolster the economy, crude prices may be supported.
However, Beijing restricted its oil refining capacity to 1 billion metric tons by 2025 to simplify its enormous oil processing sector and reduce carbon emissions, which may limit China’s need for crude oil.
The world’s largest oil user, the U.S., saw its crude oil stocks decline, which helped to sustain prices. According to market sources quoting data from the American Petroleum Institute on Tuesday, U.S. stocks decreased by around 2.7 million barrels in the week that ended on October 20.
The decrease was contrary to the eight analysts surveyed by Reuters, who, on average, predicted that oil stocks would rise by almost 200,000 barrels for the week.
According to the API statistics, distillate stockpiles decreased by roughly 2.3 million barrels, and gasoline inventories decreased by about 4.2 million. Later on Wednesday, U.S. government figures on inventories are forthcoming.
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