Oil declines in early May 1st trade

Oil continued to decline due to the possibility of a cease-fire in the Middle East reducing tensions, Bloomberg reported.

Additionally, concerns about high inflation affecting US demand weighed on the market ahead of a Federal Reserve meeting.

Brent crude hovered around $85 a barrel after a 1 per cent decrease on Tuesday, while West Texas Intermediate remained above $81.

Trading volumes were low in Asia due to public holidays in countries like China and Singapore.

May began with oil facing challenges following a turbulent April, during which prices surged to their highest levels since October following Iran’s unprecedented attack on Israel. Despite OPEC+ supply cuts supporting prices, uncertainty surrounding US monetary policy and weakness in fuel markets, particularly diesel, are contributing to the headwinds.

ANZ Banking Group Ltd. analysts Brian Martin and Daniel Hynes noted that the potential for a cease-fire in Gaza has eased concerns about escalating conflict and supply disruptions. However, ongoing signs of inflation have raised worries about crude oil demand, especially with the approaching US driving season (summer), when gasoline demand typically increases.

Adding to the bearish sentiment, US crude inventories reportedly increased by 4.9 million barrels last week, according to the American Petroleum Institute. If confirmed by official data, this would mark the fifth expansion in six weeks.