Investing.com – Oil prices fell marginally in Asian trading on Thursday as traders steadily trimmed the crude oil risk premium amid easing geopolitical tensions in the Middle East, while mixed U.S. inventory data also provided lackluster signals.
by 21:12 ET (0112 GMT). Last week, both contracts fell sharply from nearly six-month highs.
Oil markets digest mixed US supplies
Official US data on Wednesday showed oil inventories fell by 6.4 million barrels in the week to April 19, largely missing expectations for a 1.6 million barrel increase.
But there was an unexpected gain of 1.6 million barrels, although it fell by a smaller-than-expected 0.6 million barrels.
Misses in inventory data showed U.S. fuel markets remain relatively well-supplied, which, along with the country’s record high production levels, dampened the outlook for tighter oil markets.
Oil risk premium falls as Middle East tensions ease
But the biggest source of pressure on oil prices has been growing confidence that recent hostilities between Iran and Israel will not escalate into a full-scale war.
Although the two countries have been striking at each other over the past two weeks, neither side has given any indication that it wants to intensify hostilities.
That led traders to quash expectations that escalating geopolitical tensions in the Middle East would disrupt oil supplies from the oil-rich region.
While the US and its allies have indeed outlined stricter oil sanctions against Iran, it remains unclear to what extent these sanctions will be imposed given that the Biden administration is trying to avoid higher oil and fuel prices ahead of the 2024 presidential election.
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More US Economic Signals and Interest Rate Signals
Surprisingly softer-than-expected US data also weighed on oil prices this week as it fueled fears that slowing economic growth in the world’s biggest fuel consumer will block demand.
More data on the US economy will be available in the coming days, with first-quarter data due later on Thursday.
The data, the Federal Reserve’s preferred measure of inflation, will be released Friday and is expected to take into account the central bank’s interest rate outlook.
Easing expectations that the Fed will cut interest rates soon has also been a key pressure point on oil markets in recent weeks.