Crude Down Sharply On Higher USD And Lower Geopolitical Risk

Oil prices fell around 2% on Tuesday after stronger-than-expected US PMI data which pushed the greenback higher (USD index +0.7%). The Israel/Gaza conflict also seems contained for now while hostage negotiations continue. There is also pressure from the US and Israelis against a ground offensive.

• WTI fell below $83 to a low of $82.94/bbl and closed around $83.69. It made a high of $86.30 earlier. Brent closed at $88 but had fallen below this level with the low at $87.35. Earlier the intraday high was $90.68.
• Crude remains sensitive to US economic news and developments in the Middle East. Secretary of State Blinken said that US personnel in Syria and Iraq had been “repeatedly attacked” by “Iran’s proxies” and that the US will defend its people and security “swiftly and decisively”. Iran continues to be the main risk to the conflict in Israel/Gaza spreading.
• The lifting of sanctions on Venezuela in exchange for holding free elections is unlikely to release enough crude to cover any disruption to Iranian output.
• Bloomberg is reporting that US crude inventories fell another 2.67mn barrels after -4.38mn the previous week, according to people familiar with the API data. There was a 4.17mn barrel drawdown of gasoline stocks and -2.31mn of distillate.