Only two days ago analysts were predicting oil over $100 a barrel, but by Wednesday midday, crude prices were nose-diving by close to 3% as demand concerns heavily outweighed the prospect of a wider regional conflict in the Middle East.
At 12:41 p.m. ET on Wednesday, Brent crude oil was trading down 3.18% at $87.16, for a $2.86 per barrel loss on the day, while the U.S. crude oil benchmark, West Texas Intermediate (WTI), was trading down 3.25% at $82.59, for a loss of $2.77 per barrel on the day.
Earlier on Wednesday, the Energy Information Administration (EIA) released its weekly inventory report showing a build of 2.7 million barrels to 460 million barrels in the week ending April 12. Expectations based on a Reuters poll had only been for a 1.4-million-barrel-build, causing oil prices to plummet.
In the meantime, analysts have also walked back their fears of a wider regional war in the Middle East, assessing that Iran’s missile and drone strikes directed at Israel would not lead to severe sanctions on Iranian oil exports.
“Oil prices go about their business of unwinding some of the war premium that has been priced in,” also noting that oil prices were experiencing downward pressure over dwindling hopes of interest rate cuts by the Fed.
After convening its war cabinet on Monday, Israel has still not decided on a response to Iran’s missile barrage–the bulk of which were shot down by Israel defense systems, allowing Tehran to portray itself as having launched an unprecedented retaliation for the leveling of its diplomatic facilities in Syria, despite the fact that the missile barrage had no real impact, other than in terms of rhetoric.
In the meantime, proxy warfare continues between Iran and Israel, particularly in Lebanon, where Israeli fighter jets struck Hezbollah targets in the south of the country in retaliation for an Hezbollah strike in northern Israel that injured 18 Israelis.
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