(Reuters) – Oil prices were little changed on Thursday, as a higher-than-expected fuel inventories drawdown in the U.S and renewed tensions in the Middle East countered strength in the dollar.
Brent crude futures slipped 11 cents, or 0.16%, to $70.67 a barrel by 1038 GMT, while U.S. West Texas Intermediate crude (WTI) contract for April was flat
The more active WTI May contract fell 12 cents, or 0.18%, to $66.79.
U.S. government data showed a higher-than-expected drawdown last week in distillate inventories, including diesel and heating oil, which fell by 2.8 million barrels, outstripping a drop of 300,000 barrels expected in a Reuters poll.
“U.S. oil demand outlook remains healthy despite lower air travel passenger volumes,” JPMorgan analysts said in a note, adding that reduced U.S. travel activity did not signal broader weakness in the demand outlook.
U.S. crude inventories, rose 1.7 million barrels, however, exceeding expectations for an increase of 512,000 barrels in an earlier Reuters poll.
“Available oil inventory data suggests a moderately undersupplied oil market in early 2025. We retain our view that the oil market will be closely balanced this year, in contrast to market expectations of larger oil surpluses,” said UBS analyst Giovanni Staunovo.
Putting a lid on crude prices was the dollar which inched up after the Federal Reserve indicated it was in no rush to cut rates further this year due to uncertainties around U.S. tariffs.
The U.S. dollar was up 0.50%, making crude more expensive for foreign buyers.
The U.S. central bank left its key interest rate unchanged on Wednesday, a move widely anticipated by the market, but reaffirmed its forecast for two 25 basis point reductions by the year-end.
Interest rate cuts typically boost economic activity and energy demand.
Some analysts however are expecting an uneven oil price uptrend in the near term.
“I am expecting a choppy upward drift in the oil markets right now,” said OANDA’s senior market analyst Kelvin Wong, adding that bullish price drivers are stimulus measures out from China and the return of hostilities between Israel and Hamas.
Global risk premiums rose after Israel launched a new ground operation on Wednesday in Gaza after breaking a ceasefire of nearly two months.
The United States kept up airstrikes on Houthi targets in Yemen in retaliation for the group’s attacks on ships in the Red Sea. U.S. President Donald Trump has also vowed to hold Iran responsible for future Houthi attacks.
Staunovo added that in the near term, U.S. tariff news is likely to keep oil prices volatile.
U.S. tariffs on Canada, Mexico and China have raised recession fears, which have weighed on oil prices as that would have a dampening effect on demand for crude.
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