Oil prices edged lower on Thursday as concerns over weaker global demand outweighed continuing fears of supply disruptions linked to the conflict in the Middle East.
Brent crude futures fell 42 cents, or 0.47%, to $88.56 a barrel, while US West Texas Intermediate (WTI) crude declined 55 cents, or 0.66%, to $82.72.
The declines came after both benchmarks had posted gains in recent sessions, with traders assessing a combination of weaker demand expectations, rising US inventories and ongoing uncertainty surrounding the Strait of Hormuz.
OPEC and IEA cut oil demand forecasts
A key factor weighing on prices was a downgrade in global oil demand expectations.
The Organisation of the Petroleum Exporting Countries (OPEC) on Wednesday lowered its forecast for global oil demand growth in 2026 to 580,000 barrels per day.
Meanwhile, the International Energy Agency (IEA) projected that global oil consumption would contract by 1.6 million barrels per day this year. The estimate represents a significant deterioration from its previous forecast of a 1 million-barrel-per-day decline.
The IEA attributed the weaker outlook partly to restricted fuel supplies and higher prices linked to the ongoing US-Israeli war with Iran, which has affected economic activity and fuel consumption.
US crude inventories surge
Oil prices also came under pressure after US government data showed a much larger-than-expected increase in commercial crude inventories.
According to the Energy Information Administration (EIA), US crude stockpiles increased by 17.4 million barrels in the week ended August 7, reaching 424.4 million barrels.
It was the largest weekly increase since January 2023 and pushed inventories to their highest level since June 5.
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The build was particularly notable because analysts polled by Reuters had expected crude inventories to decline by around 1.4 million barrels.
The increase was partly linked to weaker exports, adding to concerns that demand conditions in the world’s largest oil-consuming market could remain under pressure.
Strait of Hormuz remains a major concern
Despite the downward pressure on prices, supply risks from the Middle East continue to support the market.
There has been no progress in efforts by Iran and the United States to revive an interim agreement aimed at ending the conflict in the Gulf, according to a senior Iranian source.
The situation around the Strait of Hormuz and Bab el-Mandeb Strait is particularly important because both are major routes for Middle Eastern oil and gas shipments.
Recent attacks on shipping have heightened concerns over the safety of vessels travelling through the region.
Analysts at Haitong Futures said navigation conditions had deteriorated further, with some vessels reportedly switching off tracking signals. This makes it more difficult for traders to determine the actual level of oil supplies moving through the region.
As a result, oil markets remain caught between two competing forces: weaker global demand and rising inventories on one side, and continuing geopolitical and supply risks in the Middle East on the other.
