Oil prices experienced a slight decline on Wednesday, influenced by a smaller-than-anticipated reduction in US crude inventories and ongoing concerns about Chinese demand. However, potential supply disruptions in the Middle East and Libya prevented steeper losses. By 11:20 a.m. EDT (1520 GMT), Brent crude futures had decreased by 62 cents, or 0.78 percent, to $78.93 per barrel, while US West Texas Intermediate crude futures dropped by 66 cents, or 0.87 percent, to $74.87.

The market saw a more than 2 percent drop on Tuesday, following a 7 percent surge over the preceding three days that pushed Brent above $81 and WTI to over $77. According to government data, US crude inventories fell by 846,000 barrels to 425.2 million barrels last week, a figure lower than the 2.3 million-barrel draw expected by analysts in a Reuters poll. Refining operations increased during the same period.

Matt Smith, the lead oil analyst at Kpler, expressed surprise at the modest crude draw despite robust refinery operations, which reached a six-week high. He attributed the limited draw to sustained strong imports and a slight decrease in exports. Concerns over Chinese demand also persisted, as recent data indicated a faltering economy and reduced oil demand from refiners.

Amarpreet Singh, an analyst at Barclays, noted in a report that Chinese demand remains feeble, and the anticipated rebound in the second half has not yet materialized. Supply risks, particularly the potential loss of Libyan oil output and the escalation of the Israel-Gaza conflict involving Iranian-backed Hezbollah in Lebanon, continued to pose significant threats to the oil market, mitigating Wednesday's price drops.

Several Libyan oilfields have suspended production due to a dispute between rival government factions over control of the central bank and oil revenue, putting approximately 1.2 million barrels per day at risk. Despite these disruptions, there has been no official confirmation of any closures from the Tripoli-based government or the National Oil Corp.

Giovanni Staunovo, an analyst at UBS, suggested that the Libyan disruptions should tighten the oil market, but investors are waiting to see a decline in Libyan crude exports. Tim Snyder, chief economist at Matador Economics, emphasized that geopolitical risks will continue to keep global crude oil prices volatile.