Israel/Hamas War Loses Sting, Oil Down As $90 Ceiling Predicted

Meanwhile, a huge U.S. stock draw is perceived as a one-off: File Image/Pixabay

Amid U.S. crude inventories plummeting by 6.4 million barrels and Goldman Sachs predicting a $90 ceiling on Brent, oil prices on Wednesday settled lower, influenced by Middle East hostilities losing their sting.

Brent settled down 40 cents at $88.02 per barrel, while West Texas Intermediate settled down 55 cents to $82.81.

While there was no explanation for reduced concerns over the Israel/Hamas war other than the fact it has not affected crude supplies, Goldman Sachs stated that the perception that the conflict may be de-escalating could reduce prices by another $5-$10 per barrel, limiting Brent to a $90 ceiling.

Meanwhile, extremely high crude exports were cited as the reason for the 6.4 million barrel stock draw in the U.S. for the week ended April 19, but this had less impact on trading since tanker tracking data revealed lower exports this week.

The Energy Information Administration also disclosed that gasoline inventories dropped by 600,000 barrels in the week to April 19, with production averaging 9.1 million barrels daily, compared to an inventory decline of 1.2 million barrels for the previous week. 

As for middle distillates, the EIA reported an inventory build of 1.6 million barrels for the week to April 19, with production averaging 4.8 million barrels daily; this was in contrast to a draw of 2.8 million barrels for the previous week.

For its part, Bloomberg pointed out that overall, timespreads are signalling tighter conditions, “with the gap between Brent’s two nearest contracts widening to $1.05 a barrel in backwardation, a bullish pattern in which the nearer contract trades at a premium to the next in sequence….that compares with 69 cents a week ago.”

Yet, Goldman maintained its outlook by noting that the market is shaping up to be bearish, partly due to global oil inventories rising as a result of crude recently stuck offshore thanks to the Red Sea disruptions now unloading.

Waren Patterson, head of commodity strategy at ING, struck a similar tone by writing that the upward potential for prices in limited: “The market is obviously of the view that spare OPEC production capacity will come into play in the event of any supply shocks, or that ongoing tension is unlikely to lead to significant supply losses.”