Oil prices remained stable on Wednesday after recent fluctuations, as attention shifted from Middle East tensions to upcoming indicators related to the U.S. economy and interest rates. The unexpected decrease in U.S. inventories, as indicated by industry data, provided some support to crude prices. Additionally, the weakening of the dollar following softer-than-anticipated U.S. purchasing managers index data contributed to the stability of oil prices.
Brent oil futures, set to expire in June, held steady at $88.50 per barrel, while West Texas Intermediate crude futures increased by 0.1 percent to reach $83.46 per barrel at 20:50 ET (00:50 GMT).
Read more: Oil prices rebound by 27 cents, Brent crude reaches $87.27 per barrel
Unexpected draw in U.S. oil inventories
Data from the American Petroleum Institute revealed a draw of 3.2 million barrels in U.S. oil inventories during the week ending April 19, contrary to expectations of a build-up of 1.8 million barrels. This trend is typically indicative of the official inventory data, which is scheduled to be released later on Wednesday, and suggests a tightening of the U.S. markets as the summer season, characterized by increased travel, approaches. The continual decline in gasoline inventories, in particular, suggests that fuel demand in the country remains robust, despite recent significant increases in gas prices.
Market participants are now awaiting the release of first-quarter gross domestic product (GDP) data from the U.S. on Thursday, as it will provide further insights into the world’s largest fuel consumer. Moreover, this reading is expected to influence the outlook for U.S. interest rates, as a strong economy provides the Federal Reserve with greater flexibility to maintain higher interest rates for an extended period.
Weaker purchasing managers index data impacts dollar
However, the weaker-than-expected purchasing managers index data for April had somewhat diminished this notion and resulted in losses for the dollar on Tuesday. A decline in the value of the dollar benefits oil prices since they are denominated in the greenback. Furthermore, a weakened dollar stimulates demand by making oil more affordable for international buyers.
Later in the week, additional indicators regarding U.S. interest rates will be released, including the PCE price index, which is the preferred inflation gauge of the Federal Reserve. These developments will provide further guidance and insight into the future direction of interest rates.
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