Oil prices steadied above $88 a barrel on Wednesday after rallying in the previous session on a surprise fall in U.S. crude stocks and a drop in business activity in the world's largest oil consumer.

- Brent crude futures fell 24 cents, or 0.27%, to $88.18 a barrel. U.S. West Texas Intermediate crude futures lost 33 cents, or 0.4%, to $83.03 a barrel.

- That reversed some of Brent's roughly 1.6% gain from the previous session, when the market was also buoyed by a weaker U.S. dollar and as investors dialled down concerns over conflict in the Middle East.

- Perceived geopolitical tensions in the Middle East could remove another $5-10 a barrel in coming months, putting a $90 a barrel ceiling on Brent.

- U.S. business activity cooled in April to a four-month low, with S&P Global saying on Tuesday that its flash Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 50.9 this month from 52.1 in March.

- The world’s biggest economy currently falls into the "bad news is good news category. The odds of a Fed rate cut have grown once again.

- U.S. interest rate cuts could bolster economic growth and, in turn, demand for oil.

- Attention shifted to macro issues, to the stock markets and to the dollar and none of them disappointed.

- U.S. crude inventories fell by 3.237 million barrels in the week ended April 19, according to market sources citing American Petroleum Institute figures. In contrast, analysts expected a rise of 800,000 barrels.

- Traders will be watching the official data release on oil and product stockpiles.

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