Oil prices fell slightly in on Wednesday as signs of a large weekly build in U.S. inventories pointed to less tight markets, although concerns over escalating Middle East tensions remained a factor.
Crude prices had seen a strong run-up over the past two weeks, as the prospect of a bigger conflict in the Middle East, sparked bets of potential supply disruptions in the region. However, this rally stalled in recent sessions, with prices coming under pressure from a strengthening U.S. dollar and concerns that weak economic conditions could dent oil demand in 2024.
Read more: Oil prices climb on China’s economic growth, Middle East tensions
Brent oil futures fell 0.1 percent to $89.89 per barrel, while West Texas Intermediate (WTI) crude futures declined 0.2 percent to $84.69 per barrel by 20:58 ET (00:58 GMT). Both contracts were trading well below the over five-month highs reached last week.
The American Petroleum Institute (API) data showed U.S. crude inventories rose by 4.09 million barrels in the week to April 12, much more than the expected build of 600,000 barrels. This followed a 3.03 million barrel increase in the prior week, largely driven by U.S. production remaining at record highs above 13 million barrels per day. The build in crude stocks, despite increasing refinery activity, raised concerns that U.S. oil markets were not as tight as initially thought.
However, a drop in gasoline inventories of about 2.5 million barrels indicated that demand in the world’s biggest fuel consumer was picking up ahead of the summer season. The API data typically precedes similar readings from official U.S. inventory data, which was due for release later in the day.
Pressure from stronger dollar, demand concerns
Oil prices fell from over five-month highs in recent sessions, even as geopolitical tensions in the Middle East worsened, as a spike in the U.S. dollar on expectations of higher-for-longer interest rates weighed on international demand. Markets also feared that restrictive monetary policy could further stymie demand in 2024, especially with economic growth already seen cooling, with mixed economic data from China adding to these concerns. Nonetheless, oil prices remained relatively underpinned by fears that a worsening conflict in the Middle East could disrupt supply.
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