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Oil drops as concerns over Middle East ease

oil prices

Brent crude futures dropped 40 cents, or 0.45%, to settle at $88.02 a barrel, while U.S. WTI crude futures slid 55 cents, or 0.66%, to $82.81

Oil prices dropped on Wednesday as concerns over conflict in the Middle East eased and business activity in the US slowed, although a decline in U.S. crude oil inventories put a floor on those losses.

Brent crude futures dropped 40 cents, or 0.45%, to settle at $88.02 a barrel, while U.S. West Texas Intermediate (WTI) crude futures slid 55 cents, or 0.66%, to $82.81.

That reversed some of Brent’s gains earlier in the week, buoyed by a softer U.S. dollar.

It seems the fundamentals that we trade with are leaning towards a little settling down in the Middle East, according to Tim Snyder, economist at Matador Economics.

Perceived de-escalation between Iran and Israel could remove another $5-10 a barrel in coming months, Goldman Sachs analysts stated in a note. These analysts estimated a $90 per barrel ceiling on Brent.

U.S. crude stockpiles dropped by 6.4 million barrels to 453.6 million barrels in the week ended April 19, the Energy Information Administration (EIA) said.

The large crude draw was the result of very high crude exports, according to UBS analyst Giovanni Staunovo. But it could be a one-off, he added, as preliminary tanker tracking data this week shows lower exports.

U.S. business activity cooled in April to a four-month low, with S&P Global saying on Tuesday that its flash Composite PMI Output Index, which tracks the manufacturing and services sectors, dropped to 50.9 this month from 52.1 in March.

The U.S. central bank is expected to start lowering rates this year, which could boost economic growth and, in turn, stimulate demand for oil.

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