Oil settles lower on weaker US gasoline demand, Gaza ceasefire hopes

March 21 – Oil prices settled slightly lower on Thursday, pressured by weaker US gasoline demand data and reports of a United Nations draft resolution calling for a ceasefire in Gaza.

Brent crude futures for May settled down 17 cents, or 0.2%, to USD 85.78 a barrel, while US West Texas Intermediate futures for May settled own 20 cents, or 0.3%, to USD 81.07 a barrel after a fall of about 1.8% in the previous session.

Crude inventories in the United States, the world’s biggest oil consumer, unexpectedly declined last week, the US Energy Information Administration (EIA) reported on Wednesday. EIA/S

Though gasoline inventories fell for a seventh week, down 3.3 million barrels to 230.8 million, gasoline product supplied, a proxy for product demand, slipped below 9 million barrels.

The fall suggested that gasoline markets, which had underpinned a recent market rally, may have been overbought, according to Bob Yawger, director of energy futures at Mizuho.

Oil prices also were pressured by confirmation that the US drafted a U.N. resolution calling for a ceasefire that would allow the release of 40 Israeli hostages in return for hundreds of Palestinians detained in Israeli jails, Yawger added.

Investors also took heart from the US central bank, which held interest rates in a range of 5.25% to 5.50% on Wednesday, but kept to an outlook for three rate cuts this year.

Lower rates could boost economic growth and good news for oil sales.

US business activity held steady in March, but prices increased across the board, suggesting that inflation could remain elevated after picking up at the start of the year.

Supporting prices, US Labor Department data on Thursday showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting that job growth remained strong in March.

Ukrainian attacks on Russian refineries also prompted investors to trade crude at higher prices, factoring in that the strikes could hit global petroleum supplies.

Ukrainian drones have targeted at least seven Russian refineries this month. The attacks have shut down 7%, or around 370,500 barrels per day, of Russian refining capacity, according to Reuters calculations.

Analysts say prolonged disruptions could force Russian producers to reduce supply if they are unable to export crude oil and face storage constraints.

Elsewhere, Germany’s economy was likely in recession in the first quarter of 2024 as weak consumption and anemic industrial demand continue to push the recovery further into the future, the central bank said in a regular economic report on Thursday.

Also on Thursday, the Bank of England’s governor said Britain’s economy is “moving in the right direction” for the central bank to start cutting interest rates.

(Additional reporting by Emily Chow, Jeslyn Lerh, and Paul Carsten in London; Editing by Jacqueline Wong, Jason Neely, David Evans, Alexander Smith, and David Gregorio)