Oil prices are facing downward pressure this
week, with Brent crude dropping by 0.4% to $90.28 per barrel. On Wednesday,
prices dipped even further to $89.00 per barrel amidst significant geopolitical
tensions, particularly concerning potential missile strikes from Iran on
Israeli military and government facilities. Despite these concerns, investors
are skeptical about the likelihood of such an escalation and are withdrawing
capital from crude assets. Last week, $103.8 million was pulled out of the
United States Oil Fund (USO), followed by another $49.1 million this week,
indicating a broader market uncertainty prompting this move.
Market unease has been exacerbated by March
inflation figures, which surpassed expectations. U.S. 10-year Treasuries yields
surged to 4.56%, the highest since November 13, 2023, while bets on interest
rate cuts by the Federal Reserve (Fed) in June plummeted to 16.4% from 56.1%.
Institutional investors are increasingly skeptical about the prospects of a
soft landing for the American economy in 2024, which is contributing to the
negative sentiment surrounding oil prices.
Adding to the bearish sentiment, the Energy
Information Administration (EIA) reported a substantial increase in oil
inventories, rising by 5.8 million barrels last week compared to a forecasted
increase of only 900,000 barrels. This marks the third consecutive week of
inventory growth, prompting the EIA to revise its oil production forecast
upward by 280,000 bpd to 13.21 million bpd.
While Brent crude prices are currently
hovering around $92.00 per barrel, a significant breakthrough towards $100 per
barrel seems unlikely without a serious escalation of the Middle East conflict,
which is not the prevailing scenario at present. Instead, prices are more
likely to roll back to the support level at $81.00-83.00 per barrel,
particularly in the second half of April.
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