Yuka Obayashi
TOKYO (Reuters) – Oil prices fell in early trading on Wednesday as concerns about global demand due to weak momentum in the Chinese economy and fading expectations for short-term interest rate cuts in the United States outweighed supply concerns due to escalating tensions in the Middle East. .
At 0042 GMT, futures for June delivery were down 7 cents, or 0.1%, at $89.16 a barrel, and futures for May delivery were down 10 cents, or 0.1%, at $85 a barrel. .It was 26 dollars.
Oil prices have tumbled so far this week as economic headwinds weighed on investor sentiment and investors focused on how Israel responds to Iran's attack on Israeli territory over the weekend, capping gains due to geopolitical tensions. It has softened in some places.
Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities, said, „Concerns about demand have increased due to the view that the US interest rate cut is likely to be delayed and economic indicators that are weaker than expected in China.''
„The market had been rising until last week on supply concerns amid escalating tensions in the Middle East, but Iran's relatively contained aggression does not provide any buying ground,“ he said.
Barring any new developments, he expected WTI to trade around $83-$88.
Fed Chairman Jerome Powell said a series of disappointing indicators showing higher-than-expected inflation means it will take longer than previously thought for the Fed to be confident that inflation is heading toward 2%. He said that means there is a high possibility.
In China, the world's largest oil importer, economic growth in the first quarter exceeded expectations, but multiple indicators in March, including real estate investment, retail sales and industrial production, showed that domestic demand remained weak. This is putting pressure on the overall momentum.
In the Middle East, the third meeting of Israel's wartime ministers, scheduled for Tuesday to decide on a response to Iran's first-ever direct attack, was postponed until Wednesday, as Western allies warned of a major Israeli escalation. That's because it is eyeing swift new sanctions against Tehran to deter it. .
But analysts say Iran's unprecedented missile and drone attacks on Israel are a threat to the Biden administration's move to control Iranian oil exports, due to concerns about soaring oil prices and angering China, its biggest buyer. He said there was little chance of prompting further sanctions.
Meanwhile, U.S. crude oil inventories rose last week more than analysts expected in a Reuters poll, while gasoline and distillate inventories fell, according to market watchers citing American Petroleum Institute data on Tuesday.
Official data from the Energy Information Administration, the statistical arm of the US Department of Energy, is expected to be released at 10:30 a.m. (2:30 GMT) on Wednesday.