Investing.com– Oil prices fell slightly on Wednesday, extending sharp losses after a swathe of weak economic readings raised concerns over demand, although other data showed a sustained decline in U.S. inventories.
The prospect of a deescalation in the Israel-Hamas war also stymied bets that the conflict will disrupt Middle Eastern oil supply, as multiple reports suggested that Israel had delayed a planned ground assault on Gaza.
Crude prices fell about 2% on Tuesday as weak data from the euro zone pointed to deteriorating economic conditions in the region, which could in turn stymie oil demand.
The weak data largely overshadowed positive purchasing managers’ index readings from the U.S., while other data also showed that U.S. inventories likely shrank further in the past week.
fell 0.1% to $87.98 a barrel, while fell 0.2% to $83.56 a barrel by 20:58 ET (00:58 GMT). Both contracts were close to a two-week low.
US inventories unexpectedly shrink- API
Data from the (API) showed that U.S. inventories shrank more than 2 million barrels (mb) in the week to October 20, ducking expectations for a build of 1.6 mb.
The reading indicated that steady exports and domestic fuel consumption were keeping U.S. supplies tight, with fuel demand remaining strong even after the end of the summer season.
The API data usually heralds a similar trend in government data on inventories, which is due later on Wednesday. The decline in inventories comes amid tightening global supplies, following deep supply cuts by Saudi Arabia and Russia earlier this year.
The inventory data was preceded by strong PMI readings, which showed that both U.S. and activity unexpectedly grew in October. But the pace of growth remained languid.
Still, the benefited from the improved data, which also weighed on oil prices. A stronger dollar makes U.S. crude more expensive for international buyers.
European recession fears rock oil markets
Weak from the euro zone, released on Tuesday, was a key source of anxiety for oil markets this week as traders feared a recession in the region will dent oil demand.
Germany- the region’s biggest economy- is already in a recession, with Tuesday’s reading indicating no signs of improvement.
The weak data came just a few days before a , where the bank is widely expected to keep interest rates on hold.
Beyond the ECB, markets were also on edge over a next week.