Oil prices remained steady on Wednesday as the market weighed concerns over escalating conflicts in Europe and the Middle East against fears over demand following an unexpected increase in crude oil inventories in the United States. United.
Brent rose 2 cents to $85.35 a barrel by 0350 GMT, while West Texas Intermediate was down 6 cents at $81.51 a barrel.
Both indexes gained more than a dollar in the previous session after a Ukrainian drone attack caused a fire at an oil terminal at a major Russian port, according to Russian officials and a Ukrainian intelligence source.
In the Middle East, Israeli Foreign Minister Israel Katz has warned of an imminent “total war” with Lebanon’s Hezbollah, even as the United States tries to avoid a wider conflict between Israel and Hezbollah, supported by Iran.
An escalation of war in the region raises the prospect of disruption of crude supplies to major producers.
“Market participants are returning to pricing potential disruption risks in the event of a broader conflict, as geopolitical tensions are brought to a new front between Israel and Hezbollah,” said Yeap Jun Rong, market strategist at IG in Singapore.
“Any appeasement between the two sides appears difficult in the near term, which could keep oil prices well supported as market participants shed pockets of weakness on the economic front, from weaker-than-expected U.S. retail sales to mixed data from China this week.”
Chinese data this week showed industrial production in May fell short of expectations, but retail sales, which are a gauge of consumption, recorded their fastest growth since February.
Analysts, in an ANZ Research report released on Wednesday, said a broader risk-off tone in global markets was supporting crude oil prices, with mixed US economic data for May boosting bets that the Federal Reserve will cut rates sooner rather than later, citing strong industrial production and retail sales that have barely increased.
Federal Reserve officials are looking for further confirmation of slowing inflation and any warning signs from a still-strong jobs market as they cautiously move toward that that most of them expect to be one or two interest rate cuts by the end of the year.
Interest rate cuts could reduce borrowing costs, boosting economic activity and oil consumption.
U.S. crude oil inventories rose by 2.264 million barrels in the week ended June 14, according to market sources citing figures from the American Petroleum Institute on Tuesday, keeping crude prices from oil to increase further. Analysts polled by Reuters had expected crude inventories to fall by 2.2 million barrels.
Gasoline stocks, however, fell by 1.077 million barrels, while those of distillate products increased by 538,000 barrels, the sources said on condition of anonymity.
Official U.S. inventory data from the Energy Information Administration is due at 1500 GMT.
