Oil Steadies as ME Tensions Offset Economy Concerns

Oil steadied on Wednesday, giving up earlier gains, as Middle East supply concerns arising from the Israel-Hamas war and the shutdown of a top Libyan oilfield balanced worries about weak economic growth. A report from industry group the American Petroleum Institute showed a bigger-than-expected drop in crude inventories in the world's biggest oil consumer, but this was offset by rising supplies of refined products. Brent crude futures fell 23 cents, or 0.3%, to US$77.36 a barrel at 0913 GMT, while US West Texas Intermediate crude futures slipped 15 cents, or 0.2%, to US$72.09. "Oil prices continue to trade in an untrustworthy fashion," said John Evans of oil broker PVM. "It seems that thinking can never wander far from the sick man that is Europe."

Euro zone growth has been hovering on either size of zero for most of 2023. It may have been in recession last quarter and prospects remain weak, European Central Bank Vice President Luis de Guindos said on Wednesday. Crude on Tuesday gained about 2% after losses on Monday of more than 3%. On Sunday Libya's National Oil Corporation (NOC) declared force majeure at its Sharara oilfield, which can produce up to 300,000 barrels per day. "Oil prices are still hovering in a low range, but investors holding long positions are dominating the market mood at this very moment," said analysts at Haitong Futures, referring to investors purchasing futures in expectation of rising prices.

More attacks on shipping in the Red Sea by Yemen's Houthis in support of the Palestinians on Tuesday and potential disruptions to oil tanker flows in the area also lent support. After Tuesday's API report, official US inventory figures from the Department of Energy will be in focus at 1530 GMT to see if they show the same pattern of stock changes.