Oil prices retreated on Wednesday after reaching seven-week highs, influenced by conflicting factors of summer demand optimism and geopolitical tensions, despite an unexpected increase in U.S. crude inventories.
Brent crude futures edged down 6 cents to $85.27 a barrel by 1943 GMT, while U.S. West Texas Intermediate (WTI) crude slipped 10 cents to $81.47 per barrel.
Earlier in the session, Brent had touched $85.84, its highest level since May 1, while WTI reached $81.96, the highest since April 30. Trading activity was subdued due to a U.S. federal holiday.
Tamas Varga, an oil broker at PVM, commented, “The current snapshot presents an underwhelming picture but there are green shoots that indicate a more optimistic outlook.” He noted that Brent’s price being $8 above early June lows reflects genuine optimism about tightening global oil balances.
Both benchmarks had gained over $1 in the previous session following news of a Ukrainian drone strike causing a fire at a major Russian oil terminal. Geopolitically, concerns escalated in the Middle East as Israeli Foreign Minister Israel Katz warned of a potential conflict with Lebanon’s Hezbollah, amid broader U.S. efforts to mitigate tensions between Israel and the Iran-backed group.
“The potential escalation of tensions in the Middle East is adding some supply risk to the oil demand equation,” said Bart Melek, head of commodity strategy at TD Bank. He highlighted that recent U.S. economic data supported expectations of Federal Reserve interest rate cuts in the coming months.
Market sentiment was mixed as Chinese industrial output for May lagged expectations, though retail sales indicated the fastest growth since February.
Meanwhile, concerns over supply dynamics were underscored by reports that U.S. crude stocks unexpectedly rose by 2.264 million barrels in the week ended June 14, according to sources citing American Petroleum Institute figures. This contrasted with analysts’ expectations of a 2.2-million barrel drawdown in crude stocks. Gasoline inventories fell, while distillates saw a modest increase.
Official U.S. Energy Information Administration stocks data, expected on Thursday, will provide further clarity on market trends amidst ongoing geopolitical uncertainties and global economic indicators.
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