Oil Falls After Hitting Seven-Week High Amid War Jitters

Oil prices fell on Wednesday after hitting seven-week highs, as optimism about northern hemisphere summer demand and concerns over escalating conflicts countered an industry report stating unexpected increases in U.S. crude inventories.

Brent crude futures for August lost 6 cents, or 0.1%, to $85.33 a barrel by 18:03 GMT, while U.S. West Texas Intermediate crude dropped 8 cents, or 0.1%, to $81.57 per barrel.

Brent had earlier reached $85.84 a barrel in the session, its highest level since May 1, while WTI rose to $81.96 a barrel, a peak since April 30.

Trading activity was thin due to a federal holiday in the United States. The fact that Brent prices are eight dollars above early June lows reflects genuine optimism that global oil balance will eventually adjust.

Both benchmarks, which have surged strongly over the past two weeks, gained more than a dollar in the previous session to hit seven-week highs after a Ukrainian drone attack sparked a fire at a major Russian oil port terminal.

In the Middle East, Israeli Foreign Minister Israel Katz warned of a possible “total war” with Hezbollah in Lebanon, while the United States sought to prevent a broader conflict between Israel and the Iran-backed group.

An escalation of conflict could disrupt supply in this key region for oil production.