Oil prices moved lower on Wednesday morning after the American Petroleum Institute (API) reported a larger-than-expected increase in U.S. crude stocks for the week to March 13.
By 0108 GMT, Brent futures were down $1.15, or 1.11%, at $102.27 a barrel, while U.S. West Texas Intermediate crude had fallen $1.54, or 1.6%, to $94.67.
Market sources citing API data said U.S. crude inventories rose by 6.56 million barrels in the week ended March 13. That figure contrasted with a Reuters poll that had shown market expectations for a much smaller increase - about 380,000 barrels - for the same reporting period.
Alongside the U.S. inventory update, a number of supply-related developments in the Middle East and North Africa were in focus.
Iraq's oil minister announced that the Iraqi government and the Kurdistan Regional Government had reached an agreement to resume exports to Turkey's Ceyhan energy hub. Officials said oil flow from the Ceyhan port was scheduled to restart at 10 a.m. local time (0700 GMT) on Wednesday.
In Libya, the National Oil Corporation reported early on Wednesday that flows from the Sharara oilfield were being gradually redirected through alternative pipelines after a fire broke out. The NOC said production remained on tap and that there were no casualties.
Security events in the wider region were also noted by market observers. Tehran confirmed on Tuesday that Iran's security chief, Ali Larijani, was killed by Israel - the most senior figure to be targeted since the first day of the U.S.-Israeli war, the statement said. A senior Iranian official added that Iran's new supreme leader had rejected de-escalation offers that had been conveyed by intermediary countries.
The United States military said on Tuesday that it had targeted sites along Iran's coastline near the Strait of Hormuz, stating that Iranian anti-ship missiles posed a risk to international shipping in the area.
Mingyu Gao, chief researcher for energy and chemicals at China Futures, said that Larijani's death and the U.S. strikes on Iranian coastal positions near the Strait of Hormuz had "raised hopes that the conflict could end sooner." Gao's comment framed the recent security events in the context of how market participants might interpret their potential influence on the duration of the conflict.
Prices moved lower initially as the larger API-reported stock build suggested more available crude in the near term, while regional supply updates and security developments continued to create an uneven and closely watched backdrop for traders.
Given the mix of inventory data and geopolitical signals, market participants appeared to be balancing the immediate implications of a sizeable U.S. stock build with the uncertain trajectory of regional supply and security risks.