Oil prices fell Thursday as the surge in US inventories stoked fears of lower demand in the world’s largest oil consumer. However, drops were limited by concerns that a possible expansion of the Gaza war could disrupt Middle East supplies.
Brent crude futures were down 6 cents, or 0.1%, at $85.19 a barrel by 0635 GMT. WTI Crude futures were down 10 cents, or 0.1%, at $80.80 a barrel.
Both indexes settled slightly higher on Wednesday.
An expected surge in US crude and gasoline stockpiles is weighing on markets amid fears of weakening demand, but the market is in a drag, offset by concerns that an escalation of the conflict between Israel and Hezbollah could stifle supply.
The U.S. Energy Information Administration (EIA) reported a 3.6 million barrel increase in the country’s crude oil inventories last week, failing analysts who had expected a 2.9 million barrel decrease. U.S. gasoline inventories rose by 2.7 million barrels, compared with analysts’ expectations of a 1 million barrel decrease.
Supply of motor gasoline, a measure of demand, fell by about 417,000 barrels per day last week to 8.97 million barrels. The four-week average of demand is about 2% below last year’s levels.
However, the market’s rally is believed to be limited by weak U.S. gasoline demand despite the start of the summer driving season. Gasoline margins, reflected by the spread between gasoline and Brent and WTI, have been trending downward after peaking in the $30s per barrel range in March.
This weakness is being exacerbated by slowing diesel demand in both Europe and the U.S., and margins have been falling since August.
Meanwhile, concerns about the Gaza conflict spilling over into Lebanon have limited price declines.
In the Middle East, cross-border tensions between Israel and Lebanon’s Hezbollah have been escalating in recent weeks, stoking fears of a full-scale Israel-Hezbollah war that could draw in other regional powers, including major oil producer Iran.
Turkish President Recep Tayyip Erdogan said his country stood in solidarity with Lebanon and called for support from regional countries.
