Brent holds $85 level ahead of US inventory data

LONDON: Brent oil futures were steady on Thursday, just below seven-week highs, as escalating conflict in the Middle East raised fears of supply disruptions as the market awaited US inventory data for signals from the request.

Brent crude for August was up 28 cents, or 0.3 percent, at $85.35 a barrel by 1145 GMT.

U.S. West Texas Intermediate (WTI) futures for July, which expire on Thursday, gained 13 cents, or 0.2 percent, to $81.70.

There was no WTI settlement on Wednesday due to a US public holiday, which kept trading largely light. The more active August contract was up 7 cents at $80.78.

Oil prices will remain supported around current levels due to the rising geopolitical risk premium driven by the Middle East conflict, said ActivTrades analyst Ricardo Evangelista.

Israeli forces pounded areas in the central Gaza Strip overnight, while tanks deepened their advance into Rafah in the south.

However, expectations of a rise in inventories appear to be overshadowing fears of escalating geopolitical stress for now, said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Investors await the release of US inventory data from the Energy Information Administration (EIA) later on Thursday, a day later than usual due to the Juneteenth holiday on Wednesday.

An industry report on Tuesday showed U.S. crude oil inventories rose by 2.264 million barrels in the week ended June 14, while gasoline stocks fell, market sources said, citing figures from the American Petroleum Institute.

A seasonal increase in oil demand, refinery runs and continued weather risks added to extended production cuts by the OPEC+ producer group mean that “oil balance sheets should tighten and inventories should start to draw in the summer months ,” wrote JPMorgan commodities analysts.

Meanwhile, a rise in fuel prices on Wednesday is boosting refining margins. Brent crude oil futures rose to $20.63 a barrel on Wednesday, a two-month high.

Firmer fuel refining margins provide “a healthy dose of encouragement for those who were expecting improvements on the demand side,” PVM analyst Tamas Varga said.

Investors also digested the Bank of England’s decision to keep its key interest rate unchanged at a 16-year high of 5.25% ahead of Britain’s July 4 national election.

Higher interest rates increase the cost of borrowing, which can slow economic activity and reduce demand for oil.