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Oil futures declined Wednesday, pressured in part by official data showing weekly gains in U.S. crude and gasoline supplies.

Traders also weighed concerns over the global demand outlook against the threat of an escalation of Middle East tensions.

Price moves

  • West Texas Intermediate crude for March delivery


    fell $1.62, or 2.1%, to $76.20 a barrel on the New York Mercantile Exchange, trading 6% higher for the month.

  • March Brent crude
    the global benchmark, was down 90 cents, or 1.1%, at $81.97 a barrel on ICE Futures Europe — eying a monthly rise of 6.4% on the contract’s expiration day. April Brent

    the most actively traded contract, was off $1.13, or 1.4%, at $81.37 a barrel.

  • February gasoline
    lost 2.8% to $2.2195 a gallon, while February heating oil
    shed nearly 0.1% to $2.805 a gallon. Both traded higher for the month, ahead of their expiration at the end of the session.

  • Natural gas for March delivery
    traded at $2.112 per million British thermal units, up 1.8% in Wednesday dealings, with the contract more than 9% lower for the month.

Supply data

The Energy Information Administration on Wednesday reported a surprise weekly increase in U.S. commercial crude inventories, which climbed by 1.2 million barrels for the week ended Jan. 26.

On average, analysts surveyed by S&P Global Commodity Insights forecast a weekly decline of 2.3 million barrels. Late Tuesday, the American Petroleum Institute reported an inventory fall of 2.5 million barrels, according to analysts.

The EIA report also revealed a weekly supply rise of 1.2 million barrels for gasoline, while distillate stockpiles fell by 2.5 million barrels. The S&P Global Commodity Insights analyst survey showed forecasts for inventory losses of 450,000 barrels for gasoline and 700,000 barrels for distillates.

Crude stocks at the Cushing, Okla., Nymex delivery hub fell by 2 million barrels last week, the EIA said, while U.S. oil production rose 700,000 barrels to 13 million barrels a day. Freezing U.S. weather the week before had disrupted production, leading to a drop of 1 million barrels.

Other market drivers

Overall, “the market is trading cautiously ahead of the potential U .S. response to the recent assault in Jordan and how Iran will react in turn,” said Ewa Manthey and Warren Peterson, strategists at ING, in a note.

Oil futures have seen choppy trade this week, dropping Monday on worries about the outlook for crude demand from China after the ordered liquidation of Evergrande stoked worries about the drag from the country’s troubled property sector on the world’s second largest economy.

Those concerns appeared to outweigh worries over an escalation of tensions in the Middle East that could threaten crude supplies after a weekend drone attack by Iran-backed militants killed three U.S. troops in Jordan.

Still, traders must “watch what the response from the U.S. will be” from the tragic loss of life on Americans over the weekend, said Tariq Zahir, managing member at Tyche Capital Advisors. “If we see a response on Iranian territory, we could see energy markets really go higher.”

“For now we are entrenched in a risk-off environment,” he told MarketWatch.

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