NEW YORK: Oil prices dipped on Wednesday after the U.S. government released bearish data on crude and fuel supplies ahead of the start of the summer driving season in the United States, a period of higher demand.
Prices had earlier increased about 1% following reports Israel could be preparing to strike Iranian nuclear facilities raised fears of a supply disruption in the Middle East.
Brent futures fell 8 cents to $65.30 a barrel by 10:52 a.m. EDT (1452 GMT). U.S. West Texas Intermediate crude dipped 3 cents to $62.00.
U.S. crude, gasoline and distillate inventories all posted surprise builds in the week ended May 16, according to the latest data from the Energy Information Administration on Wednesday.
Crude inventories rose by 1.3 million barrels, while gasoline stocks rose by about 800,000 barrels and distillate stockpiles added about 600,000 barrels.
“The EIA report saw builds for crude, gasoline and distillate, which market participants didn’t like,” said Giovanni Staunovo, an analyst at UBS.
The data caused oil futures to turn negative after finding support earlier in the session from news that U.S. intelligence suggests that Israel is preparing to strike Iranian nuclear facilities, CNN reported on Tuesday, citing multiple U.S. officials.
Oil prices ease on geopolitical uncertainty
It was not clear whether Israeli leaders have made a final decision, CNN added, citing the officials.
“Such an escalation would not only put Iranian supply at risk, but also in large parts of the broader region,” ING commodities strategists said.
Considering Iran exports more than 1.5 million barrels per day (bpd), fears of supply disruptions have helped to drive prices higher, said UBS’s Staunovo.
Iran is the third-largest producer among the members of the Organization of the Petroleum Exporting Countries (OPEC) and an Israeli attack could upset flows from the country.
There are also concerns that Iran could retaliate by blocking oil tanker flows through the Strait of Hormuz, through which Saudi Arabia, Kuwait, Iraq and the United Arab Emirates export crude oil and fuel.
“If tensions were to escalate, we’re likely looking at temporary trade shifts or a supply hit of around 500,000 barrels a day - something OPEC+ could offset fairly quickly,” Rystad Energy analyst Priya Walia said.
The U.S. and Iran have held several rounds of talks this year over Iran’s nuclear programme while U.S. President Donald Trump has revived a campaign of stronger sanctions on Iranian crude exports.
Despite the discussions, U.S. officials and the Iranian Supreme Leader Ayatollah Ali Khamenei made comments on Tuesday indicating both sides remain far from a resolution.
Kazakhstan’s oil production, meanwhile, has risen by 2% in May, an industry source said on Tuesday, defying OPEC+ pressure to reduce output.
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