Oil prices dip as demand concerns outweigh Middle East supply fears
Oil prices eased in early trade on Wednesday as worries about global demand due to weak economic momentum in China and fading hopes for U.S. interest rate cuts in the near term outweighed supply fears on heightened tensions in the Middle East.
Brent futures for June delivery slipped 7 cents, or 0.1%, to $89.16 a barrel by 0042 GMT, while U.S. crude futures for May delivery fell 10 cents, or 0.1%, to $85.26 a barrel.
Oil prices have softened so far this week as economic headwinds pressured investor sentiment, curbing gains from geopolitical tensions, with eyes on how Israel might respond to Iran's attack on Israeli territory over the weekend.
"Demand concerns increased due to expectations that U.S. interest rate cuts are likely to be delayed and weaker-than-expected economic data from China," said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
"Since the market had been rising until last week on supply worries amid escalating tensions in the Middle East, the relatively restrained Iranian aggression has not provided the ground for buying up," he said.
He predicted WTI would trade around $83-$88 without any new developments.
The run of disappointing data showing stronger-than-expected inflation means the Federal Reserve will likely need more time than previously thought to be confident that inflation is on the path to 2%, Fed Chair Jerome Powell said.
In China, the world's biggest oil importer, the economy grew faster than expected in the first quarter, but several March indicators, including property investment, retail sales and industrial output, showed that demand at home remains frail, weighing on overall momentum.
In the Middle East, a third meeting of Israel's war cabinet set for Tuesday to decide on a response to Iran's firstever direct attack was put off until Wednesday, as Western allies eyed swift new sanctions against Tehran to help dissuade Israel from a major escalation.
Analysts said, however, Iran's unprecedented missile and drone strike on Israel is unlikely to prompt dramatic sanctions action on Iran's oil exports from the Biden administration due to worries about boosting oil prices and angering top buyer China.
Meanwhile, U.S. crude oil inventories rose last week more than expected by analysts polled by Reuters, however gasoline and distillates stockpiles fell, according to market sources citing American Petroleum Institute figures on Tuesday.
Official data from the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due on Wednesday.
Meanwhile, The Ministry of Petroleum and Mineral Resources has entrusted Enppi and Petrojet, leading entities in engineering design, general contracting, and construction within the petroleum sector, with the establishment of a 10-megawatt solar power station at the Assiut Oil Refinery.
The project, valued at EGP 550m, is slated for completion over the next 11 months.
In a recent announcement, the ministry highlighted ongoing efforts to harness solar energy, including a 6.5megawatt electricity generation project at the Egyptian General Petroleum Company, costing EGP 500m.
Both initiatives are funded by a European Union grant under the “Support to Energy Policy Reform” programme, ensuring no financial burden falls on the petroleum sector.
These endeavors are in line with the ministry’s commitment to transforming strategic visions into tangible, actionable projects.
The strategic importance of these initiatives is manifold: they offer renewable energy alternatives, lighten the load on the national power grid, respond to escalating electricity needs, and supply a portion of the growing domestic and industrial demand. Moreover, they conserve the petroleum fuel typically consumed for electricity production.
Building on these sustainable practices, the petroleum sector has launched two pilot projects to generate solar-powered electricity for production wells. This collaboration with leading companies employs cuttingedge solar cell systems and energy storage batteries, ensuring round-theclock power supply.
The outcomes of these trials will inform the broader application across remote production locations, aiming to enhance value, decrease petroleum imports, phase out diesel generators, and secure the best environmental and economic outcomes.