Oil prices plunged on Wednesday after the U.S. government released disappointing data on crude and fuel inventories ahead of the start of the summer driving season in the United States, a time of higher demand.

Prices had earlier risen about 1% after a report that Israel may be preparing to strike Iran's nuclear facilities raised concerns about supply disruptions in the Middle East.

Brent crude futures were down 8 cents at $65.30 a barrel by 10:52 a.m. EDT (1452 GMT). U.S. West Texas Intermediate crude was down 3 cents at $62.00.

U.S. crude, gasoline and distillate inventories all posted surprise increases in the week to May 16, the latest data from the Energy Information Administration showed on Wednesday.

Crude inventories rose by 1.3 million barrels, while gasoline stocks rose by about 800,000 barrels and distillate stocks rose by about 600,000 barrels.

"The EIA report showed a build in crude, gasoline and distillates, which is not something that market participants like," said Giovanni Staunovo, an analyst at UBS.

The data sent oil futures into the red after getting support earlier in the session from news that U.S. intelligence showed Israel was preparing to strike Iran's nuclear facilities, CNN reported on Tuesday, citing U.S. officials.

"Such an escalation would not only jeopardize Iranian supplies, but also much of the wider region," said ING's commodity strategist.

Given that Iran exports more than 1.5 million barrels per day (bpd), concerns about supply disruptions have helped push prices higher, UBS's Staunovo said.

Iran is the third-largest oil producer among the Organization of the Petroleum Exporting Countries (OPEC) and an Israeli attack could disrupt the flow of oil from the country.

There are also concerns that Iran could retaliate by blocking the flow of oil tankers through the Strait of Hormuz, through which Saudi Arabia, Kuwait, Iraq and the United Arab Emirates export crude and fuel.

"If tensions escalate, we will likely see a temporary trade shift or a supply cut of around 500,000 barrels per day - something that could be offset fairly quickly by OPEC+," said Rystad Energy analyst Priya Walia.

The U.S. and Iran have held several rounds of talks this year over Iran's nuclear program while U.S. President Donald Trump has revived a campaign of tougher sanctions on Iranian crude exports.

Despite the discussions, U.S. officials and Iran's Supreme Leader Ayatollah Ali Khamenei made comments on Tuesday that suggested the two sides were far from a settlement. Meanwhile, Kazakhstan's oil output rose by 2% in May, industry sources said on Tuesday, defying pressure from OPEC+ to cut output. (Newsmaker23)

Source: Reuters