Oil prices steady after sharp gains on geopolitical tensions

Oil prices steadied in Asian trade on Thursday after logging strong gains this week on heightened geopolitical tensions in Russia and the Middle East, which pushed up speculation over supply disruptions.

But fears of oversupplied oil markets still kept traders on edge, especially after U.S. data showed an unexpected, outsized build in inventories.

Brent oil futures for November steadied at $67.49 a barrel, while West Texas Intermediate crude futures fell slightly to $64.34 a barrel by 21:33 ET (01:33 GMT).

A softer dollar, following weaker-than-expected U.S. producer price index inflation data, offered crude some support. Markets were now looking to key U.S. consumer price index inflation data, due later on Thursday.

Russia, Middle East tensions underpin oil

Heightened concerns over supply disruptions in Russia and the Middle East underpinned oil prices this week amid heightened military action in the regions.

Poland shot down Russian drones over its airspace during a Russian attack in Western Ukraine, marking the first time that NATO forces fired a shot during the long-running conflict between Moscow and Kyiv.

The move initially ramped up concerns over a wider escalation in the conflict, especially if more NATO powers become involved. But Moscow said the incursion was not intentional, and that it was ready to discuss the incident with Poland.

In the Middle East, Israel attacked Hamas targets in Qatari capital Doha this week, directly launching strikes on a U.S. ally and potentially undermining ongoing peace talks with the Palestinian group.

The strike likely heralds sustained hostilities in the Middle East, with Israel expected to continue its offensive against Hamas in the Gaza Strip. Oil had initially risen as much as 2% after the strike, but had pared some gains.

Also underpinning oil was the prospect of stricter U.S. sanctions on Russian oil sales, with President Donald Trump seen calling for more trade tariffs against India and China, the top buyers of Russian crude.

Oil has been on a tear since Monday after the Organization of Petroleum Exporting and allies, also known as OPEC+, said it will hike production by a substantially smaller margin in October. The move heralds tighter oil markets than what traders were initially expecting.

US inventory build, oversupply jitters weigh

But overall gains in oil were held back by persistent concerns over a looming oil supply glut in the coming months. Russia and China were seen signing deals entailing more energy sales from Moscow to Beijing, while India also signaled little intent to taper off Russian oil purchases.

U.S. fuel demand was seen cooling with the end of the summer season. Data on Wednesday showed U.S. oil inventories grew 3.93 million barrels in the week to September 5, against expectations for a 1.9 mb draw.

Distillate and gasoline inventories also grew sharply, indicating that demand in the world’s biggest fuel consumer was cooling after the travel-heavy summer season.