Investing.com-- Oil prices fell slightly in Asian trade on Wednesday, extending recent losses after Israel agreed to a ceasefire with Lebanese militant group Hezbollah, which presented a smaller risk premium for crude.
But losses in oil were limited by industry data showing an unexpected, substantial draw in U.S. oil inventories, spurring some bets on tighter supply conditions.
Brent oil futures expiring in January fell 0.2% to $72.70 a barrel, while West Texas Intermediate crude futures fell 0.2% to $68.30 a barrel by 20:47 ET (01:47 GMT).
Losses in crude were also tempered by a Reuters report that the Organization of Petroleum Exporting Countries and allies (OPEC+) was considering a further delay in plans to increase production. The cartel is set to meet on December 1.
US oil inventories unexpectedly shrink- API
Data from the American Petroleum Institute showed on Tuesday that U.S. oil inventories shrank by nearly 6 million barrels in the week to November 22. Analysts expected a build of 0.25 mb, after a bumper 4.75 mb build last week.
Tuesday’s data pushed up some hopes that U.S. fuel demand remained strong, and will tighten oil supplies in the coming months.
The API data usually heralds a similar reading from government inventory data, which is due later on Wednesday.
Oil pressured by Israel-Hezbollah ceasefire
Oil prices declined over the past two sessions after media reports initially suggested that an Israel-Hezbollah ceasefire was close.
U.S. President Joe Biden announced the ceasefire deal on Tuesday. The agreement will see Israeli forces withdraw from Lebanon within 60 days, while Hezbollah will move its forces away from the area between the “Blue Line,” the unofficial border between Lebanon and Israel.
The agreement presents a deescalation in the Middle East conflict after 13 months of intense fighting, although hostilities between Israel and Hamas are still expected to continue in Gaza.
Still, the deal with Hezbollah helped quell some concerns that persistent fighting in the Middle East will disrupt oil supplies from the crude-rich region.
But oil still retained some elements of risk premium after an escalation in the Russia-Ukraine war last week, which saw investors fear any potential disruptions in Moscow’s crude output.