Oil Eases as Supply Concerns and Inventory Builds Offset Geopolitical Risk

Oil prices edged lower on Wednesday, snapping a four-day rally, as Venezuela resumed crude exports and U.S. oil inventories posted sharp increases, easing near-term supply concerns. However, the downside was capped by lingering fears of potential disruptions from Iran’s escalating civil unrest.

Brent futures slipped 20 cents (0.3%) to $65.27 a barrel, while U.S. West Texas Intermediate (WTI) fell 23 cents (0.4%) to $60.92.

Markets have already priced in a sizeable geopolitical risk premium, driven by turmoil in Iran and recent drone attacks in the Black Sea, analysts noted. “Unless tensions escalate further and materially disrupt oil flows, prices may consolidate at current levels,” said Suvro Sarkar, energy analyst at DBS Bank.

Adding pressure, data from the American Petroleum Institute (API) showed U.S. crude inventories jumped 5.23 million barrels last week. Gasoline stocks surged 8.23 million barrels, while distillates rose 4.34 million barrels, signaling ample supply in the world’s largest oil consumer. Official figures from the Energy Information Administration (EIA) are due later Wednesday.

On the supply front, Venezuela, an OPEC member, has begun reversing production cuts imposed under a U.S. embargo, with exports restarting. Two supertankers carrying roughly 3.6 million barrels combined departed Venezuelan waters, potentially marking the first shipments under a broader deal to revive exports.

Meanwhile, risks remain elevated in the Middle East. Protests in Iran, the fourth-largest OPEC producer, have raised concerns over future supply stability, though unrest has yet to reach key oil-producing regions. Citi analysts said the situation mainly boosts geopolitical risk premiums rather than causing immediate outages, prompting them to lift their three-month Brent outlook to $70 a barrel.