Oil prices fell in early Asian trade on Thursday, as a surprise rise in US inventories fueled fears of a slowdown in demand from the top oil consumer, although fears of an extension The potential of the Gaza war to disrupt supplies to the Middle East has limited the declines.
Brent crude oil futures fell 30 cents, or 0.4 percent, to $84.17 a barrel by 0028 GMT. U.S. West Texas Intermediate crude oil futures lost 32 cents, or 0.4%, to $80.58 a barrel.
Both benchmarks had settled slightly higher on Wednesday.
“An expected increase in U.S. crude oil and gasoline inventories is weighing on the market due to fears of weakening demand,” said Tsuyoshi Ueno, senior economist at the NLI Research Institute.
“But the market is in a tight situation, supported by the prospect of an escalation in the battle between Israel and Hezbollah which could hamper supply,” he added.
The U.S. Energy Information Administration (EIA) reported a 3.6 million barrel jump in the country’s crude oil inventories last week, surprising analysts polled by Reuters who had expected a drop of 2.9 million barrels.
U.S. gasoline inventories also rose by 2.7 million barrels, compared to analysts’ expectations of a decline of 1 million barrels.
Products supplied for automotive gasoline, a gauge of demand, fell by about 417,000 barrels per day last week, to 8.97 million bpd. The four-week demand average is about 2% below last year’s levels.
Mr Ueno said low consumption despite the peak of the US summer driving season had caused concern among traders.
In the Middle East, cross-border tensions between Israel and Lebanon’s Hezbollah have escalated in recent weeks, fueling fears of an all-out war between Israel and Hezbollah that could draw in other regional powers, including major producer Iran of oil.
Turkish President Tayyip Erdogan said his country stands in solidarity with Lebanon and called on regional countries to support it.
Separately, Israeli forces bombarded several areas of Gaza on Wednesday, and residents reported heavy fighting overnight in Rafah, in the south of the Palestinian enclave. (Reporting by Yuka Obayashi; Writing by Jamie Freed)
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