Oil prices were little changed on Thursday, as a higher-than-expected drawdown in U.S. fuel inventories and fresh tensions in the Middle East offset a stronger dollar.

Brent crude was up 8 cents, or 0.11%, at $70.86 a barrel by 1251 GMT, while U.S. West Texas Intermediate (WTI) crude for April delivery rose 4 cents to $67.20.

The more actively traded May WTI contract rose 5 cents, or 0.07%, to $66.96.

U.S. government data showed a larger-than-expected drawdown last week in distillate inventories, which include diesel and heating oil, which fell by 2.8 million barrels, more than the 300,000-barrel draw expected in a Reuters poll. "The US oil demand outlook remains healthy despite declining air travel passenger volumes," JPMorgan analysts said in a note, adding that the reduced US travel activity does not signal a broader weakening in the demand outlook.

However, US crude inventories rose by 1.7 million barrels, beating expectations for a 512,000-barrel increase in a Reuters poll earlier.

"The available oil inventory data suggests a fairly undersupplied oil market by early 2025. We maintain our view that the oil market will be balanced this year, in contrast to market expectations of a larger oil surplus," UBS analyst Giovanni Staunovo said.

Capping crude prices was the dollar, which edged higher after the Federal Reserve indicated it was in no hurry to cut interest rates further this year due to uncertainty surrounding US tariffs.

The dollar rose 0.52%, making crude more expensive for foreign buyers. The U.S. central bank left its benchmark interest rate unchanged on Wednesday, a move widely anticipated by markets, but maintained its forecast for two 25 basis point rate cuts by the end of the year, largely due to weaker economic growth offsetting higher inflation.

Rate cuts typically boost economic activity and energy demand.

However, some analysts expect a patchy uptrend in oil prices in the near term

"I expect a bumpy ride in the oil market at the moment," said Kelvin Wong, senior market analyst at OANDA, adding that bullish price drivers are stimulus measures from China and a resumption of hostilities between Israel and Hamas.

Global risk premiums rose after Israel launched a new ground operation in Gaza on Wednesday after breaking a nearly two-month ceasefire.

The United States continued airstrikes on Houthi targets in Yemen in retaliation for the group's attacks on ships in the Red Sea. U.S. President Donald Trump has also vowed to hold Iran accountable for future Houthi attacks. Staunovo added that in the near term, news of US tariffs is likely to keep oil prices volatile. (Newsmaker23)

Source: Reuters