Oil Prices Steady As US Demand Weakens And Economic Outlook Softens

The subdued performance followed Wednesday’s rally, when both benchmarks gained more than $1 each in reaction to developments in the Middle East and Europe.

Markets initially responded to Israel’s strike on Hamas leadership in Qatar, which came after Hamas admitted responsibility for a deadly shooting near Jerusalem earlier in the week.

Source : Freepik

Global oil benchmarks held largely unchanged on Thursday, as signs of weaker demand in the United States and concerns about oversupply outweighed the geopolitical tensions stemming from the Middle East and Russia's ongoing conflict in Ukraine.

By 7:30 AM, Brent crude futures inched up by just 1 cent, trading at $67.50 per barrel. Similarly, US West Texas Intermediate (WTI) crude futures edged higher by 2 cents to $63.69 per barrel, reported Reuters.

The subdued performance followed Wednesday’s rally, when both benchmarks gained more than $1 each in reaction to developments in the Middle East and Europe.

Markets initially responded to Israel’s strike on Hamas leadership in Qatar, which came after Hamas admitted responsibility for a deadly shooting near Jerusalem earlier in the week.

Tensions also flared in Eastern Europe, where Polish and NATO air defences intercepted suspected Russian drones that had veered into Polish airspace during Moscow’s assault on western Ukraine.

This marked the first recorded instance of a NATO member engaging directly in Russia’s war. Despite these events, traders saw little immediate threat to oil flows.

Focus Shifts to US Supply and Demand

Market attention soon returned to fundamentals. The Energy Information Administration reported that US crude inventories rose by 3.9 million barrels in the week ending 5 September, against forecasts of a 1 million-barrel decline. Gasoline stocks also surprised to the upside, climbing by 1.5 million barrels when analysts had anticipated a draw of 200,000 barrels. Rising inventories, coupled with signs of softening consumer demand, underlined worries that the US economy may be slowing.

Falling producer prices and a weakening labour market have heightened expectations that the US Federal Reserve will take action at its upcoming mid-September policy meeting. Analysts widely expect a 25-basis-point cut, although some believe stronger measures could be considered. “Easing labour market conditions mean the FOMC is set to vote for a 25bp cut next week ... although a rare triple dissent in favour of a 50bp move could steal the headlines,” Stephen Brown, deputy chief economist for North America at Capital Economics, wrote in a note.

Policy Moves in Focus

The European Central Bank is expected to keep interest rates steady when it announces its decision on Thursday. Traders will be watching both the Fed and ECB for indications of how central banks plan to balance inflationary pressures with signs of slowing growth.

For now, oil prices remain capped by concerns about demand softness in the world’s largest economy, even as geopolitical risks simmer in the background. Without evidence of supply disruptions, traders appear cautious in pushing prices higher, focusing instead on the delicate balance between global supply and a slowing demand outlook.

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