U.S. business activity slowdown contributes to decrease in oil prices, easing concerns in the Middle East

Oil prices were moderately lower on Wednesday as concerns about conflict in the Middle East eased and business activity in the world’s largest oil consumer slowed. However, a drop in U.S. crude oil inventories helped limit these losses. Brent crude futures fell 27 cents to $88.15 a barrel, while U.S. West Texas Intermediate crude futures dropped 38 cents to $82.98. The decline partially reversed Brent’s gains earlier in the week, which were driven by a weaker U.S. dollar. Analysts are hopeful for potential de-escalation between Iran and Israel, which could further stabilize oil prices.

The U.S. Energy Information Administration reported a significant decrease in U.S. crude stockpiles, falling by 6.4 million barrels to 453.6 million barrels. This drop was attributed to high crude exports. While this may be a one-time occurrence as preliminary tanker tracking data suggests lower exports, it still had an impact on oil prices. U.S. business activity also slowed in April, with the Composite PMI Output Index falling to 50.9 from 52.1 in March.

There are hopes for improved economic growth in the U.S. as interest rate cuts could stimulate demand for oil. In Germany, business morale improved more than expected in April, suggesting positive economic prospects for Europe’s biggest economy. Geopolitically, while tensions in the Middle East have eased, the conflict between Israel and Hamas continues. Israel’s preparations for a potential assault on Rafah indicate that the situation remains volatile.