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Brent futures were down 63 cents, or 0.72%, at $86.66 a barrel,
while U.S. West Texas Intermediate (WTI) crude futures traded 64
cents lower, or 0.77%, at $82.05 a barrel at 0947 GMT.
Investors are unwinding the geopolitical risk premium in oil
prices on the perception that any Israeli retaliation to Iran's
attack on April 13 will be moderated by international pressure.
"It appears that the international pressure on Israel not to
escalate tension with Iran will mercifully lead to a measured
and moderate response to the weekend's strikes," PVM analyst
Tamas Varga said.
Iran is the third-largest producer in the Organization of the
Petroleum Exporting Countries, according to Reuters data, and an
easing of its conflict with Israel would reduce the potential
for supply disruptions.
"Brent is now back to levels before the April 1 attack on the
Iranian consulate, suggesting that the latest bout of risk
premium from heightened Israel-Iran tensions has eroded," said
analyst Vandana Hari of Vanda Insights.
Meanwhile, analysts at JP Morgan highlighted in a note late on
Tuesday that worldwide oil consumption so far in April has been
200,000 barrels per day (bpd) below its forecast, averaging 101
million bpd.
Surging U.S. crude inventories also kept a lid on prices. Oil
inventories rose by 2.7 million barrels to 460 million barrels
in the week ending April 12, the Energy Information
Administration said, nearly double analysts' expectations in a
Reuters poll for a 1.4 million-barrel build.
Stockpiles built as refinery utilization declined at a time when
processing typically rises ahead of summer driving demand in the
U.S.
Oil prices fell on Wednesday despite the U.S.' announcement that
it would not renew a license set to expire on Thursday that had
broadly eased Venezuela oil sanctions.
(Reporting by Robert Harvey in London, Katya Golubkova in Tokyo
and Mohi Narayan in New Delhi; Editing by Ros Russell)
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