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Oil prices settled at their highest since late October on Wednesday as investors worried about supply disruptions from a worsening geopolitical landscape, although a jump in U.S. crude oil inventories eased some of those concerns.

Brent futures rose 43 cents, or 0.5%, to settle at $89.35 a barrel, and U.S. West Texas Intermediate futures gained 28 cents, or 0.3%, to $85.43 a barrel.

Both contracts were up more than a dollar during the session, but pulled back after the U.S. Energy Information Administration reported a 3.2 million barrel increase in crude stocks. [EIA/S]

Analysts polled by Reuters had expected an over 1.5 million barrel decrease, in line with preliminary data reported by the American Petroleum Institute on Tuesday. [API/S]

“The EIA report went in the other direction on crude oil from what the API reported yesterday so that has helped pause the rally a little bit,” said Bob Yawger, director of energy futures at Mizuho.

Technical indicators also pressured prices, signalling oil futures were overbought.

“We needed a little bit of a pullback to reload before gunning higher again. Other than being overbought, market fundamentals continue to point upwards,” he said.

Brent and WTI futures have hit five-month intraday highs for three consecutive sessions, lifted by concerns that oil supplies could tighten due to Ukraine’s attacks on Russian refineries and potential widening of the conflict in the Middle East.

Iran, which provides support for the Hamas militia fighting Israel in Gaza, has vowed revenge against Israel for an attack on Monday that killed high-ranking military personnel. Iran is the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC).

Oil markets are figuring out how to price in these developments and for how long, alongside strong economic data from U.S. and China and expectations of declining U.S. crude output, KPMG U.S. energy leader Angie Gildea said.

U.S. Federal Reserve Chair Jerome Powell stuck with a cautious approach to the central bank’s policy on interest rate cuts, indicating the need for more debate and data before making a decision.

The comments offer some support for oil demand growth as they seem to affirm solid U.S. economic growth expectations, said Rob Haworth, senior investment strategist at U.S. Bank Asset Management.

Bank of America Global Research raised its 2024 Brent and WTI forecasts to $86 and $81 a barrel respectively, it said in a note.

Meanwhile, a meeting of the top OPEC+ ministers kept oil output policy unchanged and pressed some countries to boost compliance with output cuts.

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