Oil prices remain stable following increase due to US stock decline and business data rally

Brent crude oil prices held steady around $88 a barrel on Wednesday, following a surprising drop in U.S. crude stocks and a decrease in business activity in the world’s largest oil consumer. The market saw a slight dip, with Brent crude futures down 35 cents to $88.07 a barrel and U.S. West Texas Intermediate crude futures losing 47 cents to $82.89.

Investors were buoyed by a weaker U.S. dollar and a perceived de-escalation in tensions between Iran and Israel, which could potentially reduce the geopolitical risk premium by $5-10 per barrel in the coming months. Analysts at Goldman Sachs even suggested a $90 per barrel ceiling on Brent.

In the U.S., business activity slowed in April to a four-month low, with the Composite PMI Output Index falling to 50.9 from 52.1 in March. This news, coupled with the possibility of a Fed rate cut, could stimulate economic growth and increase demand for oil.

On the global front, Germany’s business morale improved more than expected in April, raising hopes for a turnaround in Europe’s largest economy. Meanwhile, the Israel-Hamas conflict continued to escalate, with reports of heavy shelling and preparations for a potential assault on the city of Rafah.

Traders are eagerly awaiting the official data release on oil and product stockpiles later in the day, as market dynamics continue to shift based on macroeconomic factors and geopolitical tensions.