Brent crude futures shed 65 cents, or 0.8 per cent, to $79.05 a barrel by 0120 GMT while U.S. WTI crude was at $73.67 a barrel, down 55 cents, or 0.7 per cent

Oil prices dropped on Thursday, as concerns over low demand following a surprise U.S. crude inventory build outweighed concerns over global trade disruptions and geopolitical tensions in the Middle East.

Brent crude futures shed 65 cents, or 0.8 per cent, to $79.05 a barrel by 0120 GMT while U.S. West Texas Intermediate (WTI) crude was at $73.67 a barrel, down 55 cents, or 0.7 per cent.

Both benchmarks rose on Wednesday as investors worried about trade disruptions as major maritime carriers chose to steer clear of the Red Sea route, with longer voyages raising transport and insurance costs.

Market focus returned to sluggish global demand as the impact on the Red Sea is seen to be limited on oil as long as it does not spill over into the Strait of Hormuz, said Tsuyoshi Ueno, senior economist at NLI Research Institute.

A build in U.S. crude stocks and record domestic oil production also added to pressure, Ueno added.

The U.S. Energy Information Administration (EIA) said on Wednesday that U.S. crude inventories increased by 2.9 million barrels in the week to December 15 to 443.7 million barrels.

EIA also said U.S. crude output increased to a record 13.3 million bpd last week up from the previous all-time high of 13.2 million bpd.

For shipping, nearly 12 per cent of world traffic passes up the Red Sea and through the Suez Canal. However, the impact on oil supply has been limited so far, analysts said, because the bulk of Middle East crude is exported via the Strait of Hormuz.

Since there will be no additional production cuts by OPEC+ this year, oil prices will likely remain in range through the end of the year, with focus on key economic statistics and the U.S. dollar’s reaction to them, said Naohiro Niimura, a partner at Market Risk Advisory.

He forecasted WTI would trade between $70 and $75 this month.