(Investing) – Oil prices were largely flat on Wednesday, halting a sharp advance from earlier after reports of growing tensions between the U.S. and Iran pushed up concerns over potential supply disruptions in the Middle East.
Oil had also benefited from industry data showing U.S. oil inventories unexpectedly shrank by a large amount in the prior week, as extreme cold weather in the country disrupted production.
After gaining as much as 1.4%, Brent oil futures for April were last up 0.3% to $67.54 a barrel by 11:34 ET (16:34 GMT). Meanwhile, West Texas Intermediate crude futures were up 0.1% to $63.25 a barrel, after adding as much as 1.5%.
Overnight reports showed the U.S. shot down an Iranian drone approaching a U.S. aircraft carrier in the Arabian Sea.
Separately, a group of Iranian gunboats were seen approaching a U.S.-flagged tanker in the Strait of Hormuz.
The incidents occurred just ahead of scheduled talks between Washington and Tehran this week. But Iranian officials were also seen demanding that the talks– scheduled for Friday– be narrowed to two-way negotiations on nuclear issues, sparking doubts over whether the dialogue will even take place.
U.S. President Donald Trump had threatened more military action against Iran if it did not accept U.S. demands to curb its nuclear program. Tehran had warned of bitter retaliation against any U.S. aggression.
Any increased military action in the Middle East stands to potentially disrupt oil supplies from the region– a notion that supported oil prices in recent sessions.
US inventories shrink substantially amid production outages- API data
Oil was also buoyed by industry data showing a substantial, unexpected draw in U.S. inventories.
Data from the American Petroleum Institute showed U.S. inventories shrank 11.1 million barrels (mb) in the week to January 30, compared to expectations for a build of 0.7 mb.
The API data usually heralds a similar trend from official inventory data, which is due later in the day.
The outsized draw comes as cold weather in the U.S. disrupted oil production across the country, while also disrupting exports from the gulf coast.
Disruptions in U.S. supplies had also helped boost oil prices in recent weeks.
Ambar Warrick and Peter Nurse contributed to this article
