Investing.com-- Oil prices settled lower Wednesday, as cooling tensions in the Middle East stifled bets on supply disruptions and signs of weaker gasoline demand overshadowed a much larger than expected decline in U.S. crude inventories.
At 14:30 ET (18:30 GMT), West Texas Intermediate crude futures fell 0.7% to settle $82.81 a barrel. Brent oil futures fell 0.5% to $88.02 a barrel, while
US crude inventories in surprise steep decline, but gasoline demand dips
Data from the Energy Information Administration showed Wednesday that U.S. oil inventories fell 6.4 million barrels in the week to April 19, confounding expectations for a build of 1.6 million barrels.
The steep drop comes as refinery activity picked up pace to 88.5% from 88.1% a week earlier.
Product inventories were mixed, with distillate stockpiles falling, and gasoline inventories slipping despite weaker demand.
"Subdued demand following a warmer than normal winter and weak economic growth has eased concerns of supply shortages in global gas markets," ANZ Research said in a Wednesday note.
Gasoline demand fell to 8.4 million barrels a day from 8.7 million barrels a day the previous week, the EIA said.
Iran-Israel tensions ease
Oil prices were nursing a sharp drop from near six-month highs over the past week, as a deescalation in tensions between Iran and Israel saw traders largely price out a risk premium from oil markets.
But the Israel-Hamas war showed little signs of stopping, keeping some risks of Middle Eastern geopolitics still in play for crude markets.
US GDP data, PCE inflation data awaited
Markets were now awaiting first-quarter gross domestic product data from the U.S., due on Thursday, and then Friday's PCE price index data, the Fed’s preferred inflation gauge,.for more cues on the world’s biggest fuel consumer.
The readings are also expected to tie into the outlook for U.S. interest rates, given that strength in the economy gives the Federal Reserve more headroom to keep interest rates higher for longer.
This notion was somewhat dented by weaker-than-expected purchasing managers index data for April, which sparked losses in the dollar on Tuesday. A drop in the dollar benefits oil prices, given that they are priced in the greenback.
Weakness in the dollar also helps buoy demand by making oil cheaper for international buyers.
(Peter Nurse, Ambar Warrick contributed to this article.)