Oil Prices Steady Amid U.S. Oversupply and Geopolitical Tensions

Oil prices held steady on Thursday as oversupply concerns and weakening U.S. demand offset geopolitical risks in the Middle East and Europe. Brent crude futures inched up 1 cent to $67.50 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 2 cents to $63.69 by 0156 GMT.

The modest gains followed Wednesday’s $1 rise after Israel launched an airstrike on Hamas leadership in Qatar, and NATO member Poland activated air defenses to intercept suspected Russian drones straying into its territory during attacks on Ukraine. This marked the first direct military response from a NATO country since Russia’s invasion. Despite the heightened tensions, analysts noted limited immediate impact on oil supply flows.

Market focus quickly shifted back to fundamentals as U.S. crude inventories unexpectedly rose by 3.9 million barrels in the week ending September 5, against forecasts of a 1-million-barrel draw, according to the Energy Information Administration (EIA). Gasoline stocks also climbed by 1.5 million barrels, defying expectations of a decline. The data, paired with falling producer prices and signs of a cooling labor market, highlighted weaker demand and potential oversupply risks in the world’s largest oil consumer.

Economic signals are now influencing monetary policy outlooks. Analysts widely expect the U.S. Federal Reserve to cut interest rates at its mid-September meeting, with forecasts leaning toward a 25 basis-point reduction. Some, however, see the possibility of a rare triple dissent pushing for a 50 basis-point cut. Meanwhile, the European Central Bank is anticipated to hold its rates unchanged.

With crude markets balancing geopolitical uncertainty and softening U.S. economic indicators, traders remain cautious. Rising inventories and weaker consumption are reinforcing concerns that oil demand growth could falter even as conflicts continue abroad.