Oil Steadies as Stockpiles Rise and Traders Monitor Middle East

Oil prices steadied on Wednesday after a two-day decline, as US crude inventories expanded and traders monitored geopolitical tensions in the Middle East. West Texas Intermediate (WTI) futures traded above $73 a barrel, while Brent closed lower below $77. US crude stockpiles swelled by 5.8 million barrels last week, the biggest increase since late April, according to government data. Gasoline inventories dropped.

The market remains on edge about Israel's intentions to launch a retaliatory strike against Tehran, which has sparked fears about an all-out war. President Joe Biden has discouraged an attack on Iranian oil facilities, and Iran has warned that it's ready to launch thousands of missiles if needed. However, concerns over China's economy continue to linger, and the lack of fresh major stimulus from Beijing this week prompted a broad market selloff on Tuesday, including in oil.

The Middle East remains a critical region for global oil supply, with Iran, a major oil producer, being a member of the Organization of the Petroleum Exporting Countries (OPEC). The direct involvement of Iran in the conflict raises the prospect of disruptions to oil supplies, as Iran's oil output rose to a six-year high of 3.7 million barrels per day in August.

A panel of ministers from OPEC+ is set to meet later on Wednesday to review the market, with no policy changes expected. From December, OPEC+, which includes Russia, is set to raise output by 180,000 barrels per day (bpd) monthly. Any suggestion that production hikes will proceed could offset concerns of supply disruptions in the Middle East.

U.S. stockpile data was mixed: crude oil and distillate inventories fell last week while gasoline inventories rose, market sources said, citing American Petroleum Institute figures on Tuesday. The market awaits further developments in the Middle East and China's economic policies to gauge the direction of oil prices in the coming days.