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International oil prices dipped slightly on Wednesday following a report from the U.S. Energy Information Administration showing an unexpected increase in crude inventories, dampening market sentiment that had been bolstered by expectations of tightening global supplies.

Brent crude futures, the global benchmark, settled down 0.8% at $84.67 per barrel, while West Texas Intermediate crude, the U.S. standard, declined by 0.9% to close at $80.13 per barrel. The modest retreat interrupted a three-day winning streak that had pushed prices to their highest levels in nearly three weeks.

The EIA reported that U.S. crude stockpiles rose by 3.7 million barrels last week, confounding analysts who had predicted a 2.1 million barrel decrease. The surprise build added to concerns about weakening demand in the world’s largest oil consumer.

“Today’s inventory data caught many traders off guard,” said Michael Tran, energy strategist at RBC Capital Markets. “We’re seeing the market recalibrate after the report contradicted the bullish narrative that had been gaining momentum.”

The increase in U.S. inventories comes at a time when markets have been closely monitoring supply disruptions in Libya, where production has been hampered by political unrest. The North African nation, which sits on Africa’s largest proven oil reserves, has seen output fall by approximately 300,000 barrels per day since protesters began occupying key oil facilities earlier this month.

Meanwhile, tensions in the Middle East continue to simmer, particularly surrounding Iran’s nuclear program and ongoing conflicts involving regional proxies. While these geopolitical factors have provided a floor for oil prices, they haven’t been sufficient to overcome immediate concerns about demand fundamentals.

Market participants are also assessing the implications of recent economic data from China, the world’s largest oil importer. Beijing reported lower-than-expected GDP growth for the second quarter, raising questions about future energy consumption. Chinese refiners have been reducing their crude purchases in recent weeks, contributing to the bearish sentiment.

“The Chinese economy isn’t providing the demand boost many had anticipated earlier this year,” said Sarah Palmer, commodities analyst at Energy Intelligence Group. “This creates a complicated picture where supply risks remain elevated, but demand signals are increasingly mixed.”

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, faces mounting pressure to reconsider their production strategy. The group has maintained substantial output cuts to support prices, but several member countries are eager to increase production as prices have stabilized above $80 per barrel.

Industry analysts are divided on the outlook for the remainder of 2023. Some point to traditionally stronger demand during the summer driving season in the Northern Hemisphere and potential hurricane disruptions to Gulf of Mexico production as factors that could push prices higher in coming weeks.

“We’re in a delicate balance right now,” explained Robert Thompson, senior oil analyst at Precision Energy Research. “The market is weighing legitimate supply concerns against economic headwinds and uncertain demand growth. This tension is likely to keep prices volatile in the near term.”

Trading volumes have been relatively thin during the summer holiday period, potentially exaggerating price movements. Market participants will be closely watching upcoming U.S. jobs data and inflation reports for clues about the Federal Reserve’s next moves, which could influence the dollar’s strength and, by extension, oil prices.

For consumers, the recent price behavior suggests that gasoline prices may stabilize after several months of fluctuation. The U.S. national average for regular unleaded gasoline currently stands at $3.57 per gallon, according to AAA, down slightly from last month but still approximately 20 cents higher than the same period last year.