Oil prices fell on Thursday after a rise in US crude stockpiles and a climb in the dollar index, giving up some ground gained a day earlier when prices jumped on Middle East tensions.

Brent crude futures declined by 67 cents, or 0.7 per cent, to $89.46 a barrel at 0630 GMT. US West Texas Intermediate crude futures eased 71 cents, or 0.8 per cent, to $84.68 a barrel.

The benchmark oil contracts had settled nearly 2 per cent higher on Wednesday but fell back after the Wall Street Journal reported that Israel has agreed to delay an expected invasion of Gaza for now.

“The movements of oil markets are primarily involved with the Hamas-Israel war,” said Tina Teng, markets analyst at CMC.

Investors were also digesting a rise in US crude inventories, indicative of weak demand.

US crude inventories (USOILC=ECI) climbed by 1.4 million barrels in the latest week to 421.1 million barrels, according to the Energy Information Administration, exceeding a 240,000-barrel gain expected by analysts from a Reuters poll.

“Markets remain volatile as Middle East jitters ebb and flow, but underlying fundamentals are seasonally weaker than expected with product demand in the US surprisingly weak,” Citi analysts said on Thursday.

Refinery crude runs in the US fell by 207,000 barrels per day, while refinery utilisation rates also edged lower by 0.5 percentage points to 85.6 per cent of total capacity, EIA data showed.

Macroeconomic concerns continued to weigh on the outlook for oil demand, as eurozone business activity data took a surprise downturn this month.

The dollar index was also up slightly on Thursday, which helped pressure oil prices. A stronger dollar dampens oil demand as it makes the commodity more expensive for those holding other currencies.