Oil prices remained relatively stable during trading on Wednesday, as the market balanced concerns over escalating conflicts in Europe and the Middle East with worries about weakening demand following an unexpected buildup in U.S. crude inventories.
Brent crude futures edged up 2 cents to $85.35 per barrel by 03:50 GMT, while U.S. West Texas Intermediate (WTI) crude dipped 6 cents to $81.51 per barrel. Both benchmarks had gained over $1 in the previous session after a Ukrainian drone strike led to an oil terminal fire at a major Russian port, according to Russian officials and a Ukrainian intelligence source.
Mixed economic data from China
This week’s data from China showed that May industrial output lagged expectations, but retail sales, a gauge of consumption, marked their quickest growth since February.
Global risk sentiment supports crude prices
An ANZ Research report on Wednesday noted that a broader risk-on sentiment across global markets had supported crude oil prices, with mixed U.S. economic data for May boosting bets that the Federal Reserve will cut interest rates sooner rather than later. Strong industrial production and retail sales data were counterbalanced by other indicators.
Read more: Oil prices decline but remain on course for weekly gains amid OPEC optimism
Fed cautious amid inflation and labor market concerns
Federal Reserve officials are looking for further confirmation that inflation is cooling and for any warning signs from the still-strong labor market, as they navigate towards what most expect to be an interest rate cut or two by the end of this year. Interest rate cuts could reduce borrowing costs, spurring economic activity and lifting oil consumption.
Unexpected build in U.S. crude inventories
However, keeping oil prices from rising further, U.S. crude inventories rose by 2.264 million barrels in the week ended June 14, according to market sources citing American Petroleum Institute figures on Tuesday. Analysts had expected a 2.2 million barrel draw. Gasoline inventories fell by 1.077 million barrels, while distillates rose by 538,000 barrels, the sources said.
Official U.S. inventory data from the Energy Information Administration is due at 15:00 GMT.
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