SINGAPORE (Reuters) -Oil prices eased slightly on Wednesday but remained close to their seven-week highs. The market balanced concerns over escalating conflicts with demand worries following an unexpected build in U.S. crude inventories.
Brent crude futures eased 17 cents to $85.16 a barrel by 0635 GMT, while U.S. West Texas Intermediate crude was down 22 cents to $81.35 per barrel.
Both benchmarks rose by over $1 in the previous session following a Ukrainian drone strike. Russian officials and a Ukrainian intelligence source reported an oil terminal fire at a major Russian port.
In the Middle East, Israeli Foreign Minister Israel Katz warned of a nearing “all out war” with Lebanon’s Hezbollah, even as the U.S. attempted to avoid a broader conflict between Israel and Iran-backed Hezbollah.
An escalating war in the region raises the prospect crude supply from key producers could be disrupted.
Oil prices had recovered quite strongly in the last two weeks, amid potential disruption risks “in the event of a wider conflict, as geopolitical tensions are brought to a new front between Israel and Hezbollah,” said Yeap Jun Rong, a market strategist at IG in Singapore.
“Any cooling off between both parties seems difficult in the near term, which may keep oil prices well-supported as market participants shrug off pockets of weakness on the economic front, from weaker-than-expected U.S. retail sales to mixed sets of data out of China this week.”
Furthermore, the correlation between oil price movements and geopolitical events underscores the interconnected nature of global energy markets.
Amidst these uncertainties, fluctuations in US crude stocks serve as a barometer of market sentiment and supply dynamics, impacting both domestic and international oil markets.
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