LONDON: Oil prices fell to a three-week low on Thursday, extending losses on hopes of easing tensions in the key producing region of the Middle East, while investors turned their focus to a bleaker demand picture.
Brent futures were down 60 cents, or 0.7%, at $86.69 a barrel, while U.S. crude futures traded 53 cents lower, or 0.6%, at $82.16 a barrel at 1135 GMT. Both were down for a fourth straight session.
Prices were down more than $1 at their intra-day low and have slumped around 4% so far this week.
Investors are unwinding the geopolitical risk premium in oil prices on the perception that any Israeli retaliation to Iran’s attack on April 13 will be moderated by international pressure.
Any new Western sanctions against Iran could be offset by greater output from other oil-producing nations, and their impact could be limited without Chinese cooperation, said Ole Hvalbye, commodities analyst at SEB Research.
Iran is the third-largest producer in the Organization of the Petroleum Exporting Countries, according to Reuters data, and an easing of its conflict with Israel would reduce the potential for supply disruptions.
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“However, the current reassuring production cushion makes increasing thirst for the black stuff very much quenchable,” said PVM analyst Tamas Varga said.
Analysts at JP Morgan highlighted in a note late on Tuesday that worldwide oil consumption so far in April has been 200,000 barrels per day (bpd) below its forecast, averaging 101 million bpd.
Surging U.S. crude inventories also kept a lid on prices. Oil inventories rose by 2.7 million barrels to 460 million barrels in the week ending April 12, the Energy Information Administration said, nearly double analysts’ expectations in a Reuters poll for a 1.4 million-barrel build.
Stockpiles built up as refinery utilization declined at a time when processing typically rises ahead of summer driving demand in the U.S.
Oil prices fell 3% on Wednesday despite Venezuela losing a key U.S. license that allowed it to export oil to markets around the world.
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