Oil Futures Slip as Investors Await Inventory Data and Assess Global Demand Outlook

The oil futures market experienced a slight decline in the early hours of Wednesday as investors eagerly awaited official data on U.S. crude inventories. At the same time, they carefully weighed concerns regarding the global demand outlook against the potential escalation of Middle East tensions.

Price Movements

• West Texas Intermediate crude for March delivery (CL00, -0.94% CL.1, -0.94% CLH24, -0.94%) fell by 1.1%, equivalent to 82 cents, settling at $77 a barrel on the New York Mercantile Exchange.
• The global benchmark, March Brent crude (BRNH24, -1.00%), experienced a 1% decline, totaling 87 cents, reaching $82 a barrel on ICE Futures Europe. April Brent (BRN00, -0.88% BRNJ24, -0.88%), the most actively traded contract, dropped by 1% or 81 cents, settling at $81.69 a barrel.

Key Market Drivers

According to strategists Ewa Manthey and Warren Peterson from ING, the cautious trading activity in the market stems from potential U.S. responses to the recent assault in Jordan and the subsequent reaction from Iran.

This week, oil futures have witnessed volatile trading conditions. On Monday, concerns arose regarding the outlook for crude demand from China following the ordered liquidation of Evergrande. Worries grew about the potential drag on the world's second-largest economy due to the troubled property sector.

Despite these concerns, worries surrounding a potential escalation of tensions in the Middle East and its impact on crude supplies appeared to be overshadowed. The recent drone attack by Iran-backed militants resulted in the loss of three U.S. troops in Jordan.

Furthermore, investors will also be closely monitoring the release of inventories data on Wednesday.

Late Tuesday, the American Petroleum Institute reported that U.S. crude inventories declined by 2.5 million barrels last week, with stocks at the Nymex delivery hub in Cushing, Oklahoma dropping by 2 million barrels. Gasoline inventories, however, saw an increase of 600,000 barrels, while distillate stocks decreased by 2.1 million barrels.

More anticipated data from the Energy Information Administration will be released on Wednesday morning. Analysts are predicting declines of 2.3 million barrels in domestic commercial crude supplies for the week ending January 26. Additionally, analysts also forecast inventory decreases of 450,000 barrels for gasoline and 700,000 barrels for distillates, according to a poll conducted by S&P Global Commodity Insights.