The decline in oil prices on Wednesday was caused by several factors, including decreased worries over conflict in the Middle East and slowing business activity in the world’s largest oil consumer. While a decline in U.S. crude oil inventories helped limit these losses, the price of Brent crude futures dropped 27 cents to $88.15 a barrel by 11:30 a.m. EDT, while U.S. West Texas Intermediate crude futures fell 38 cents to $82.98.
Despite earlier gains driven by a weaker U.S. dollar, there was a reversal of some of Brent’s gains in the week ended April 19 due to concerns about geopolitical tensions in the Middle East and other global issues affecting demand for oil. Tim Snyder, an economist at Matador Economics, noted that the fundamentals suggested a calming down in the region, potentially removing $5-10 per barrel from the market in coming months.
The large drop in U.S. crude stockpiles was due to very high crude exports, although preliminary tanker tracking data showed lower exports than expected. Additionally, U.S business activity cooled significantly in April and fell to a four-month low as indicated by S&P Global’s Composite PMI Output Index which dropped from 52