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Investing.com-- Oil prices slipped lower Thursday on signs of weakening U.S. demand, handing back some of the strong gains seen earlier this week on heightened geopolitical tensions in Russia and the Middle East.
At 05:55 ET (09:55 GMT), Brent oil futures for November fell 0.3% to $67.26 a barrel and West Texas Intermediate crude futures dropped 0.5% to $63.38 a barrel.
U.S. inventory build, oversupply jitters weigh
The crude market headed lower Thursday after signs that U.S. fuel demand was 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.
Also weighing was the monthly report from the International Energy Agency, which indicated that world oil output is now anticipated to be higher than previously forecast this year, even as supply could be dented by sanctions on Russia and Iran.
The IEA said on Thursday that global oil production is projected to rise by 2.7 million barrels per day in 2025, compared to a prior estimate of 2.5 million bpd. Next year, the figure is seen increasing by a further 2.1 million barrels per day.
But the group flagged that the outlook for supply is facing conflicting trends, with the possibility of fresh international penalties being placed on Moscow and Tehran. At the same time, markets are assessing plans for elevated production by the Organization of the Petroleum Exporting countries and its allies, known as OPEC+.
On Sunday, the group agreed to raise production by a cumulative 137,000 bpd in October, much lower than hikes of about 555,000 bpd and 411,000 bpd in earlier months.
OPEC+, heightened conflict risks provide support
That said, the oil markets had posted gains earlier in the week amid heightened concerns over supply disruptions in Russia and the Middle East given the 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 pared some gains.
Also underpinning oil was the prospect of stricter 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 had 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.
A softer dollar, following weaker-than-expected U.S. producer price index inflation data, also offered crude some support, and markets were now looking to key U.S. consumer price index inflation data, due later on Thursday.
Ambar Warrick contributed to this article