Oil prices were little changed on Wednesday, holding near their highest levels in seven weeks as the market weighed concerns over escalating global conflicts against demand worries following an unexpected rise in U.S. crude inventories.
Brent crude futures for August, due to expire on Thursday, were down 13 cents to $85.20 per barrel by 1046 GMT, while the more active September contract eased by 5 cents to $84.48. U.S. West Texas Intermediate (WTI) crude was down 20 cents to $81.37 per barrel.
The unexpected increase in U.S. crude inventories, which rose by 2.264 million barrels in the week ended June 14 according to American Petroleum Institute (API) data, initially weighed on oil prices. Analysts had expected a 2.2 million barrel draw in crude stocks.
However, the market’s focus remained on the geopolitical tensions that have been supporting oil prices in recent weeks. This includes a Ukrainian drone strike that led to an oil terminal fire at a major Russian port, as well as warnings of a possible “all-out war” between Israel and Lebanon’s Hezbollah.
“Any cooling off between both parties seems difficult in the near term, which may keep oil prices well-supported as market participants shrug off pockets of weakness on the economic front,” said Yeap Jun Rong, a market strategist at IG in Singapore.
Despite the mixed economic data from China this week, with industrial output lagging expectations but retail sales marking their quickest growth since February, the ongoing geopolitical risks in key oil-producing regions have been dominating the market’s focus.
Analysts noted that while the higher-than-expected U.S. inventory data led to a slight drop in prices, the geopolitically-motivated supply-side concerns have been the main driver of the oil market lately. As such, any escalation in global conflicts could further boost prices and offset concerns about potential demand weakness.