Oil Prices Retreat After Reaching Seven-Week Highs Amid Demand Optimism and War Concerns – Reuters

By Deep Kaushik Vakil and Nia Williams

Oil prices experienced a slight decline on Wednesday after reaching their highest levels in seven weeks, as optimism over summer demand and concerns about escalating conflicts counterbalanced an industry report indicating an unexpected rise in inventories.

Brent crude futures fell by 6 cents, or 0.1%, settling at $85.27 a barrel by 1943 GMT, while U.S. West Texas Intermediate (WTI) crude decreased by 10 cents, also a 0.1% drop, to $81.47 per barrel. Earlier in the day, Brent had peaked at $85.84, its highest point since May 1, while WTI climbed to $81.96, the highest since April 30.

Trading volumes remained low due to a federal holiday in the U.S. Tamas Varga from oil broker PVM noted that while the current data might not be overwhelmingly positive, there are signs of a more optimistic outlook. He highlighted that Brent being $8 above the lows seen in early June indicates a genuine optimism regarding the tightening of the global oil balance.

Both benchmarks have rebounded significantly over the past two weeks, gaining over $1 in value after a drone strike in Ukraine ignited a fire at a significant Russian oil terminal.

In the Middle East, Israeli Foreign Minister Israel Katz warned of a possible "all-out war" with Hezbollah, while the U.S. seeks to de-escalate tensions between Israel and the Iran-backed group. The risk of an escalating conflict in this oil-producing region raises concerns about potential supply disruptions.

Bart Melek, head of commodity strategy at TD Bank, remarked that the rising tensions in the Middle East contribute additional risks to the oil supply, amid recent U.S. economic data suggesting a likelihood of interest rate cuts by the Federal Reserve in the coming months.

Data from China this week reported that May’s industrial output fell short of expectations, while retail sales, a crucial indicator of consumption, saw their fastest growth since February.

On the U.S. front, crude oil inventories reportedly increased by 2.264 million barrels for the week ending June 14, according to sources citing figures from the American Petroleum Institute. Analysts had anticipated a draw of 2.2 million barrels.

Conversely, gasoline inventories declined by 1.077 million barrels, whereas distillate stocks rose by 538,000 barrels, as reported by market sources. Official inventory data from the U.S. Energy Information Administration is expected to be released on Thursday.