By Deep Kaushik Vakil and Nia Williams
(Reuters) -Oil prices fell from a seven-week high on Wednesday as optimism about summer demand and concerns about escalating conflict offset an industry report that said inventories unexpectedly rose.
futures fell 6 cents, or 0.1%, to $85.27 a barrel at 1943 GMT, while U.S. West Texas Intermediate crude fell 10 cents, or 0.1%, to $81.47 a barrel.
Brent reached $85.84 per barrel earlier in the session, its highest level since May 1, while WTI rose to $81.96 per barrel, its highest level since April 30.
Trading activity was thin due to a US federal holiday.
“The current snapshot presents a disappointing picture, but there are green shoots pointing to a more optimistic outlook,” said Tamas Varga of oil broker PVM.
The Brent price, which is $8 above its early June low, “shows genuine optimism that the global oil balance will eventually tighten,” Varga added.
Both benchmarks, which had recovered strongly over the past two weeks, rose more than $1 in the previous session after a Ukrainian drone attack led to a fire at an oil terminal at a major Russian port.
In the Middle East, Israeli Foreign Minister Israel Katz warned of a possible “all-out war” with Lebanese Hezbollah, even as the US sought to avoid a wider conflict between Israel and the Iran-backed group.
An escalating war risks disrupting supplies in the oil-producing region.
“The potential escalation of tensions in the Middle East adds some supply risk to oil demand,” said Bart Melek, head of commodity strategy at TD Bank, adding that recent U.S. economic data supported bets that the Federal Reserve will interest rates would decrease. in the next months.
Chinese data this week showed industrial production fell short of expectations in May, but retail sales, a measure of consumption, posted the fastest growth since February.
Meanwhile, U.S. crude inventories rose by 2.264 million barrels in the week ended June 14, market sources said on Tuesday, citing figures from the American Petroleum Institute. Analysts polled by Reuters had expected a drop of 2.2 million barrels of crude oil.
However, gasoline inventories fell by 1.077 million barrels, while distillates rose by 538,000 barrels, the sources said, speaking on condition of anonymity. [API/S]
Official stock data from the U.S. Energy Information Administration will be released Thursday.
