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Oil prices steady after rallying on US stock decline, business data

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Oil prices steadied above $88 a barrel on Wednesday after rallying in the previous session on a surprise fall in US crude stocks and a drop in business activity in the world's largest oil consumer.
 
Brent crude futures fell 24 cents, or 0.27 per cent, to $88.18 a barrel by 1024 GMT. US West Texas Intermediate crude futures lost 33 cents, or 0.4 per cent, to $83.03 a barrel.
 
That reversed some of Brent's roughly 1.6 per cent gain from the previous session, when the market was also buoyed by a weaker US dollar and as investors dialled down concerns over conflict in the Middle East.
 
Perceived de-escalation between Iran and Israel could remove another $5-10 a barrel of "the still elevated geopolitical risk premium" in coming months, Goldman Sachs analysts said in a note, putting a $90 a barrel ceiling on Brent.
 
US business activity cooled in April to a four-month low, with S&P Global saying on Tuesday that its flash Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 50.9 this month from 52.1 in March.
 
"The world’s biggest economy currently falls into the "bad news is good news category", said Tamas Varga at oil broker PVM. "The odds of a Fed rate cut have grown once again."
 
US interest rate cuts could bolster economic growth and, in turn, demand for oil.
 
"Attention shifted to macro issues, to the stock markets and to the dollar and none of them disappointed," Varga added.
 
US crude inventories fell by 3.237 million barrels in the week ended April 19, according to market sources citing American Petroleum Institute figures. In contrast, six analysts polled by Reuters had expected a rise of 800,000 barrels.
 
Traders will be watching the official data release on oil and product stockpiles at 1430 GMT.
 
Meanwhile, the Israel-Hamas conflict continues to rage with some of the heaviest shelling in weeks on Tuesday, while sources on Wednesday said Israel is preparing to evacuate Rafah ahead of a promised assault on the city.
 
 

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