Oil prices were broadly steady on Wednesday, as concerns that conflict may spread in the Middle East and threaten production in one of the world’s major regions for crude production eased slightly.
Brent crude futures slipped 10 cents, or 0.1%, to $80.59 a barrel by 1057 GMT. U.S. West Texas Intermediate crude futures were down 19 cents, or 0.2%, to $78.16 per barrel.
After hitting a seven-month low of $76.30 at the beginning of last week, Brent rose more than 3% on Monday to cap a five-day run of gains, closing at $82.30 a barrel.
“The recent rally in crude came to a halt yesterday with prices falling back as fears of a retaliatory attack on Israel by Iran receded, with the risk premium slashed,” said Ashley Kelty, an analyst at Panmure Liberum.
Iran had vowed a severe response to the killing of the leader of Hamas late last month. Three senior Iranian officials have said that only a ceasefire deal in Gaza would hold Iran back from direct retaliation against Israel for the assassination.
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Israel has neither confirmed nor denied its involvement but it is fighting in Gaza against Hamas after the group attacked Israel in October.
To counter Iran, the United States Navy has deployed warships and a submarine to the Middle East.
“The extent of Iran’s reprisal, as well as Israel’s response, will likely determine whether the current conflict in the Middle East broadens into a regional conflict,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia.
Also hindering oil price gains, the International Energy Agency trimmed on Tuesday its 2025 estimate for oil demand growth, citing the impact of a weakened Chinese economy on consumption. That came after OPEC cut expected demand for 2024 for similar reasons.
Signs of healthier U.S. demand had supported prices in earlier trading.
“The American Petroleum Institute reported a significant drawdown in U.S. crude inventories of 5.2 million barrels, far more than a forecasted decline of 2 million. The data signalled that oil demand remains healthy,” said Danish Lim, investment analyst at Phillip Nova.
Official U.S. government data from the Energy Information Administration is due later on Wednesday. Reuters