Written by Deep Kaushik Vakil and Nia Williams
(Reuters) – Oil prices fell on Wednesday after hitting a seven-week high, as summer demand optimism and concerns about escalating conflicts outweighed an industry report that said inventories had risen unexpectedly.
By 1803 GMT, futures fell six cents, or 0.1%, to $85.33 per barrel, while US West Texas Intermediate crude fell eight cents, or 0.1%, to $81.57 per barrel.
Brent reached $85.84 a barrel earlier in the session, its highest level since May 1, while West Texas Intermediate crude rose to $81.96 a barrel, its highest level since April 30.
Trading activity was weak due to the federal holiday in the United States.
“The current picture presents a disappointing picture, but there are green signs that indicate a more optimistic outlook,” said Tamas Varga of oil brokerage BVM.
Varga added that Brent's $8 rise above its lows recorded in early June “shows real optimism that the global oil balance will eventually tighten.”
After the two benchmarks rebounded strongly in the past two weeks, they gained more than a dollar in the previous session after a Ukrainian drone strike led to a fire in an oil terminal in a major Russian port.
In the Middle East, Israeli Foreign Minister Israel Katz warned of a potential “all-out war” with Lebanese Hezbollah, even as the United States tried to avoid a broader conflict between Israel and the Iran-backed group.
The escalating war threatens to disrupt supplies in the oil-producing region.
“The potential escalation of tensions in the Middle East adds some supply risks to the oil demand equation,” said Bart Melek, head of commodities strategy at TD Bank, adding that recent US economic data supports bets that the Federal Reserve will move toward lowering interest rates. In the coming months.
China data this week showed that industrial output in May lagged expectations, but retail sales, a measure of consumption, recorded the fastest growth since February.
Meanwhile, US crude inventories rose by 2.264 million barrels in the week ending June 14, market sources said on Tuesday, citing American Petroleum Institute figures. Analysts polled by Reuters had expected crude inventories to decline by 2.2 million barrels.
The sources, who spoke on condition of anonymity, said gasoline stocks fell by 1.077 million barrels, while distillate stocks rose by 538,000 barrels. (API/Interfaces)
Official inventory data from the US Energy Information Administration is due on Thursday.
