Oil prices fell in early Asian trading on Thursday due to concerns over slow demand from the United States, the world’s largest oil consumer, following an unexpected increase in U.S. stockpiles. This decline was tempered by fears that the ongoing conflict in Gaza could potentially disrupt Middle Eastern oil supplies.
Brent crude oil futures dropped by 30 cents, or 0.4%, to $84.17 a barrel, while U.S. West Texas Intermediate crude futures fell by 32 cents, or 0.4%, to $80.58 per barrel. Both benchmarks had closed slightly higher on Wednesday.
“An expected increase in U.S. inventories of crude oil and gasoline is weighing on the market due to fears of weakening demand,” said Tsuyoshi Ueno, senior economist at NLI Research Institute. “But the market is in a tug-of-war situation, underpinned by the prospect that an escalation in the battle between Israel and Hezbollah may hinder supply,” he added.
The U.S. Energy Information Administration (EIA) reported a surprising 3.6 million barrel increase in the country’s crude oil stocks last week, defying analysts’ expectations of a 2.9 million-barrel drawdown. U.S. gasoline stocks also rose by 2.7 million barrels, compared to forecasts of a 1 million-barrel decrease.
Additionally, the product supplied for motor gasoline, a proxy for demand, dropped by about 417,000 barrels per day last week, to 8.97 million barrels per day. The four-week average for demand is approximately 2% lower than last year’s levels. The weak consumption during the peak U.S. summer driving season has raised concerns among traders.
In the Middle East, tensions have been rising between Israel and Lebanon’s Hezbollah, fueling fears of a broader conflict that could involve other regional powers, including major oil producer Iran. Turkish President Tayyip Erdogan expressed solidarity with Lebanon and called for regional support. Meanwhile, Israeli forces continued to strike various areas in Gaza, with residents reporting intense fighting in Rafah, located in the southern part of the Palestinian enclave.
As the situation unfolds, the oil market remains caught between concerns over demand in the U.S. and potential supply disruptions in the Middle East, creating a volatile trading environment.
