The oil market fell yesterday as weak consumer confidence data in the United States fed concerns regarding the economic outlook and fuel demand after a slow start to the summer driving season, with Brent futures for August down by $1 or 1.2 per cent at $85.01 a barrel and the US West Texas Intermediate (WTI) crude futures losing 80 cents or 1 per cent to settle at $80.83 per barrel.
Consumer confidence in the world’s largest economy decreased in June while households remained upbeat about the labour market and expected inflation to moderate.
Concerns about the economy could dent gasoline (petrol) demand.
High inventory levels have made oil traders nervous about summer driving demand.
Crude oil inventories in the US rose this week by 914,000 barrels for the week ending June 21, according to The American Petroleum Institute (API), after analysts had expected a 3 million barrel draw.
For the week prior, the API reported a 2.264 million barrel build in crude inventories.
Gasoline inventories rose this week, by 3.843 million barrels, after last week’s 1.077-million-barrel decrease. As of last week, gasoline inventories are 1 per cent below the five-year average for this time of year, according to the latest EIA data.
Official government data from the Energy Information Agency (EIA) is due later on Wednesday.
Investors are also attempting to determine the precise timing of interest rate reductions by the US Federal Reserve.
Federal Reserve Governor Lisa Cook said on Tuesday that a reduction in interest rates is probable if the economy performs as anticipated. However, she refrained from specifying the timing of the US central bank’s action.
Oil drew support from supply disruption linked to Ukrainian attacks on Russian oil infrastructure. On June 21, Ukrainian drones hit four refineries, including the Ilsky refinery, one of the main fuel producers in southern Russia.
Worries of escalating tensions between Israel and the Iran-backed group Hezbollah have also underpinned oil prices, analysts said.
Reuters reported that Israeli forces killed at least 24 Palestinians in three separate airstrikes on Gaza City early on Tuesday.
Over eight months into the conflict, a ceasefire deal has not been reached despite international mediation supported by the US.