Oil futures dipped on Wednesday after surging for the last three days and hitting their highest since mid-May, while traders awaited crude inventory data from the US Energy Information Administration.
Front-month West Texas Intermediate futures declined 2% to $103.71 per barrel, while Brent futures fell 1.3% to $107.34/bbl.
According to Saxo Bank analysts, the dip reflected an unwinding of risk premium following American Petroleum Institute data showing US crude stockpiles expanded by 7.14 million barrels for the week ending September 11, despite expectations of a drop.
Markets now await official data from the US EIA for final confirmation.
Despite the short-term relief, underlying supply vulnerabilities continue to dominate the energy landscape.
Saudi Arabia has canceled September crude cargoes to Europe and suspended Yanbu loadings following drone attacks on its vital East-West pipeline, forcing the kingdom to reroute shipments through Gulf ports including via the Hormuz strait.
To compensate, Riyadh is reportedly boosting ship-to-ship transfer operations off Oman's Sohar port to supply Asian refiners.
Iranian crude exports plummeted to roughly 210,000 barrels per day in August due to the US Navy blockade on its ports, a steep drop from 2 million barrels per day earlier in the year.
Commerzbank analysts noted that "the Middle East shock is increasingly being transmitted to Asian energy costs through both higher crude prices and sharply higher freight rates."
Additional downside supply risks loom in North Africa, where an attack on Libya's Hamada-Zawiya pipeline threatens potential force majeure declarations.