Oil prices are falling on Thursday after a larger than expected build-up in US oil inventories raises fears of lower US demand. However, the fall will be limited by concerns about a potential widening conflict in the Middle East that could disrupt oil supplies, Reuters reports.

A barrel of the European reference oil, Brent, cost USD 85.08 on Thursday morning, compared to USD 85.02 on Wednesday afternoon and USD 85.51 on Wednesday evening at 20:00. At the same time, as of Thursday morning, US WTI oil is trading at USD 80.69 compared to USD 80.73 on Wednesday afternoon.

”An expected rise in US crude oil and gasoline inventories is weighing on the market due to fears of weakening demand. But the market is in a tug-of-war situation, supported by the prospect that an escalation of fighting between Israel and Hezbollah could hamper supply,” says Tsuyoshi Ueno, senior economist at NLI Research Institute.

The U.S. Energy Information Administration, EIA, reported a 3.6 million barrel increase in US crude oil inventories and a 2.7 million barrel increase in gasoline inventories last week, both higher than analysts’ expectations.

Motor gasoline supply also fell by around 417,000 barrels per day last week, indicating lower US demand.

Concerns about the war in Gaza spreading to Lebanon are keeping oil prices from falling, however. In the Middle East, tensions between Israel and Lebanon’s Hezbollah have escalated in recent weeks, raising fears of an all-out war between Israel and Hezbollah that could draw in other regional powers including major oil producer Iran.

Turkish President Tayyip Erdogan has stated that Turkey stands in solidarity with Lebanon and calls on other countries to support the country.

In the rest of the commodities market, a troy ounce of gold cost USD 2299.83 on Thursday morning compared to USD 2297.61 on Wednesday afternoon.

English edit: Catherine Brett