Oil Holds Two-Day Loss as Report Points to Rising US Inventories

(Bloomberg) -- Oil held a two-day decline after an industry report pointed to a gain in US crude stockpiles, although simmering tensions in the Middle East and ongoing OPEC+ curbs are expected to cap losses.

West Texas Intermediate was steady above $85 a barrel after closing 1.4% lower on Tuesday. Brent traded near $89. The American Petroleum Institute reported crude inventories rose by 3.03 million barrels last week, according to Oilprice.com. Official government figures are due later Wednesday.

If the Energy Information Administration confirms the increase in overall crude stockpiles, it will be a third weekly expansion. The API also reported a modest gain in Cushing inventories, but a decline in gasoline supplies. 

Oil is still up 19% this year as OPEC+ cuts supply and geopolitical tensions across the Middle East present bullish tailwinds. The market is bracing for Iran’s response to a suspected Israeli attack on its consulate in Syria last week and Hezbollah has warned it’s ready for war.

“Upside risk to oil still lies in geopolitics with an escalation of the Israel and Iran conflict the biggest lurking danger,” said Gao Mingyu, Beijing-based chief energy analyst at SDIC Essence Futures Co. However, “the negative impact of a higher oil price on demand and inflation could be the trading theme going forward,” she added.

Investors will be watching US inflation data later Wednesday for clues on the path forward for interest rates, and they will get a broader snapshot on the outlook for the oil market when OPEC and the International Energy Agency release monthly reports this week.

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