Oil prices hold steady near seven-week high amid geopolitical tensions, inventory surprises

Oil prices remained largely steady on Wednesday, hovering near their highest levels in seven weeks as the market balanced concerns over escalating geopolitical conflicts with demand worries following an unexpected build in U.S. crude inventories.

Brent crude futures eased by 34 cents to $84.99 a barrel as of 0832 GMT, while U.S. West Texas Intermediate (WTI) crude dropped 43 cents to $81.14 per barrel.

The unexpected build in U.S. crude stocks, which rose by 2.264 million barrels for the week ending June 14 according to the American Petroleum Institute (API), contrasted with analysts’ expectations of a 2.2 million barrel draw.

Gasoline inventories decreased by 1.077 million barrels, while distillate stocks increased by 538,000 barrels. Official data from the U.S. Energy Information Administration (EIA) is expected later today at 1500 GMT.

Both benchmarks saw gains exceeding $1 in the previous session following reports of a Ukrainian drone strike causing a fire at an oil terminal in a major Russian port.

The incident was confirmed by both Russian officials and a Ukrainian intelligence source.

In the Middle East, Israeli Foreign Minister Israel Katz warned of the potential for an “all-out war” with Hezbollah, a Lebanon-based militant group backed by Iran, while the U.S. sought to prevent a broader conflict.

Rising geopolitical tensions in these key oil-producing regions present risks of supply disruptions, contributing to the steady oil prices.

Market strategist Yeap Jun Rong from IG in Singapore noted that concerns about a broader conflict involving Israel and Hezbollah are likely to keep oil prices supported, despite signs of economic weakness such as weaker-than-expected U.S. retail sales and mixed economic data from China.

China’s data for May showed industrial output lagging behind expectations, although retail sales, a key indicator of consumption, posted their fastest growth since February. This mixed economic backdrop is contributing to the market’s cautious stance.

Overall, while geopolitical risks continue to support oil prices, economic indicators and inventory data are creating a complex environment for market participants.