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Brent crude futures fell 16 cents, or 0.2%, to $78.17 a barrel
by 0903 GMT. U.S. West Texas Intermediate crude lost 9 cents, or
0.12%, to $75.14.
Brent had gained 2.4% on Wednesday and WTI 2.8% in a second
straight session of gains as prices recovered from a sharp drop
on Monday, when Brent settled at its lowest since early January
and WTI early February.
Prices were supported on Wednesday by a 3.7 million barrel drop
in U.S. crude inventories, far exceeding analyst expectations of
a draw of 700,000 barrels and marking a sixth straight weekly
decline to six-month lows. [EIA/S]
"This suggests demand for physical barrels remains robust,
despite concerns about weak economic activity," ANZ analysts
said in the note.
Prices also drew support from rising tension in the Middle East
and force majeure declared on output at Libya's Sharara
oilfield, said PVM analyst John Evans said.
The killing of senior members of militant groups Hamas and
Hezbollah last week raised the possibility of retaliatory
strikes by Iran against Israel, further fuelling concerns over
oil supply from the world's largest producing region.
"The market has been on edge as it awaits a response from Iran,"
ANZ Research said in a note.
Libya's National Oil Corporation declared force majeure at its
Sharara oilfield from Tuesday, a statement said, adding that the
company had gradually reduced the field's production because of
protests.
Analysts at Citi said there was a possibility of a bounce in
prices to the low to mid-$80s for Brent.
"Upside risks in the market remain, from still-tight balances
through August, heightened geopolitical risks across North
Africa and the Middle East, the possibility of weather-related
disruptions through hurricane season and light managed money
positioning," Citi said in a note.
(Reporting by Robert Harvey in London, Arathy Somasekhar in
Houston and Sudarshan Varadhan in SingaporeEditing by David
Goodman)
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