Oil prices held steady on Thursday (September 11th) as concerns over weakening US demand and the risk of a wider oversupply were offset by concerns over attacks in the Middle East and Russia's war in Ukraine.

Brent crude futures fell 13 cents, or 0.2%, to $67.36 per barrel at 07:29 GMT, while U.S. West Texas Intermediate crude futures fell 17 cents, or 0.3%, to $63.50.

Benchmark crude prices rose more than $1 per contract on Wednesday following Israel's attack on Hamas leaders in Qatar the previous day and the mobilization of Polish and NATO air defenses to shoot down a suspected Russian drone that had entered Polish airspace during an attack in western Ukraine.

This increase continues the upward trend in oil prices for most of this month after hitting a three-month low on September 5th. While geopolitical tensions have provided some support for oil prices, the market is more concerned about oversupply, said PVM Oil Associates analyst Tamas Varga in a note.

"Tighter sanctions on buyers of Russian crude, particularly China and India, could provide additional ammunition for bullish investors, but these measures remain largely rhetorical for now," he added. US crude inventories rose by 3.9 million barrels in the week ending September 5, according to the Energy Information Administration (EIA), compared with expectations for a 1 million barrel decrease.

Meanwhile, a weakening US economy has raised expectations that the Federal Reserve will cut interest rates next week. "Traders are adopting a more cautious stance ahead of the upcoming US inflation report (later Thursday), with expectations of a more significant Federal Reserve rate cut already priced in, which could be undermined by a warmer-than-expected CPI report," said IG market analyst Tony Sycamore.

On the supply side, the Organization of the Petroleum Exporting Countries and its allies, a group collectively known as OPEC+, decided on Sunday to increase production starting in October. Although the increase was smaller than in previous months and some expectations, this move further exacerbates the oil market weakness. Oil prices are expected to fall significantly in the coming months as increased production will lead to a significant buildup in inventories, the EIA said this week. (alg)

Source: Reuters