Oil prices dipped on Thursday after rising by more than 2 per cent the previous day amid an increase in US crude stocks and easing geopolitical tension in the Middle East.
Brent, the benchmark for two thirds of the world’s oil, was trading 1.70 per cent lower at $88.60 a barrel at 9.02pm UAE time while West Texas Intermediate, the gauge that tracks US crude, was down 1.77 per cent at $83.88 a barrel.
On Wednesday, Brent closed 2.34 per cent higher at $90.13 a barrel while WTI closed 1.97 per cent up at $85.39.
“Crude prices are lower after US stockpiles unexpectedly rose and on reports that Israel has agreed to delay its invasion of Gaza,” said Edward Moya, a senior market analyst at Oanda.
“Geopolitical risks will simmer but, for now, the easing of war escalation fears has kept oil prices under pressure.”
US crude inventories, an indicator of fuel demand, increased by 1.4 million barrels in the week that ended on October 20, according to the US Energy Information Administration (EIA).
Analysts polled by Reuters were expecting a gain of 240,000 barrels.
Total petroleum stocks rose by 200,000 barrels last week while distillate fuel inventories fell by 1.7 million barrels, the EIA data showed.
Israel has agreed to delay its invasion of Gaza for now so that the US can rush missile defences to the region, the Wall Street Journal reported on Wednesday, citing officials.
Israel is also considering the effort to supply humanitarian aid inside Gaza, as well as diplomatic efforts to free hostages held by Hamas, the Journal reported.
Brent crude has risen by about 6 per cent since October 7 when Hamas, which rules Gaza, attacked southern Israel, killing about 1,400 people, and taking more than 200 hostages.
Israel has retaliated with air strikes and total siege of the Palestinian enclave, with the death toll exceeding 5,700.
“Risks remain on how the US can skilfully navigate pressure to tighten the enforceability of its sanctions on Iranian barrels without antagonising China’s growing appetite for discounted Iranian crude,” MUFG said in a research note on Thursday.
In the broader commodities market, investors are turning their attention to volatile swings in the US bond market and the “fragile state” of the world economy, Japan's largest lender said.
The Israel-Gaza war will result in more economic jitters for an “already anxious world”, Kristalina Georgieva, chief of the International Monetary Fund, said during the Future Investment Initiative in Riyadh on Wednesday.
Meanwhile, top oil-exporting company Saudi Aramco expects significant crude demand growth in the second half of the year, its chief executive Amin Nasser said at the same event this week.
“The call on the industry is [for] 103 million barrels per day [in the second half of 2023] and this is in the middle of economic headwinds,” Mr Nasser said.
China's economy grew by 4.9 per cent annually in the third quarter, faster than expected, as the government introduced stimulus measures to revive growth.