Oil Holds Modest Loss as Risk-Off Tone Counters Lower Stockpiles

(Bloomberg) -- Oil held a modest decline, with a risk-off tone in broader markets countering a drawdown in US stockpiles.

Brent crude traded near $88 a barrel after a 0.5% drop on Wednesday, with West Texas Intermediate close to $83. The drop came despite data showing nationwide crude inventories fell by a bigger-than-expected 6.37 million barrels last week as refineries ramped up processing and exports rose.

In wider markets, Asian equities retreated following concerns about the US tech sector, with a disappointing outlook from Meta Platforms Inc. spurring declines. At the end of the week, the Federal Reserve’s preferred inflation gauge will provide clues about the path ahead for monetary policy.

Crude remains higher this year, aided by supply curbs from OPEC+ and tensions in the Middle East, although it’s pulled back from recent highs above $90 a barrel as geopolitical risks in the region eased. Options skews remain in a bearish tilt toward puts, while the world’s biggest oil exchange-traded fund — the US Oil Fund — posted its largest daily outflow on record.

“As markets look beyond the risks of supply disruptions from geopolitical tensions, oil prices may take their cue from the cautious risk environment,” said Yeap Jun Rong, market strategist for IG Asia Pte. Still “for now, the upward trend since the start of the year remains in place.”

The outlook for oil demand also remains clouded, with a weakness in some refined products like diesel. Profit margins for turning crude into diesel in Asia was near the lowest level in nearly a year.

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