In early Thursday trading, oil prices declined as an unexpected increase in U.S. crude oil inventories raised concerns about slowing demand in the world's largest oil consumer, even though fears of an escalation in the Gaza war limited the drop.
As of 0028 GMT, Brent crude futures fell 30 cents to $84.17 per barrel, a drop of 0.4%. U.S. West Texas Intermediate crude futures declined 32 cents to $80.58 per barrel, also a decrease of 0.4%.
On Wednesday, both benchmark oil prices saw slight increases.
"The expected increase in U.S. crude and gasoline inventories has raised market concerns about weakening demand," said Takayuki Ueno, senior economist at NLI Research Institute.
"However, the market is also in a tug-of-war over the potential impact on supply due to the escalating conflict between Israel and Hezbollah," he added.
A report by the U.S. Energy Information Administration (EIA) showed that U.S. crude inventories unexpectedly rose by 3.6 million barrels last week, surprising analysts who had expected a drop of 2.9 million barrels, according to a Reuters poll.
U.S. gasoline inventories also increased by 2.7 million barrels, while analysts had anticipated a drop of 100,000 barrels.
The supply of gasoline for cars decreased by about 417,000 barrels per day last week to 8.97 million barrels per day. The four-week average demand was about 2% lower than the same period last year.
