Oil rose after an industry report pointed to a sizable drop in US crude stockpiles and tensions simmered in the Middle East. 

Brent crude climbed to around $81 a barrel, while West Texas Intermediate traded near $79. Both benchmarks fell by about 2% in the previous session. 

The American Petroleum Institute on Tuesday reported inventories shrank by 5.2 million barrels last week, according to people familiar with the data. That would be the seventh straight weekly drop if confirmed by official figures due Wednesday. Levels remain below seasonal averages.

Prices have endured a volatile week after a sharp rally on Monday was retraced a day later. The International Energy Agency flagged a global surplus in the fourth quarter if OPEC+ proceeds with plans to restore production in October. The Organization of the Petroleum Exporting Countries had also trimmed its forecasts for global demand over this year and next, citing downward revisions for China’s outlook.

Still, there’s a small chorus of voices saying that Brent futures still have room to advance. Citigroup Inc. analysts flagged geopolitical and weather-related risks, while Goldman Sachs Group Inc. said financial demand for crude derivatives should rebound from last week’s record low. Both banks say Brent could climb to the mid-$80s level. 

Elsewhere, risks remain that a retaliatory strike by Iran on Israel may lead to a spike in oil prices. The US said that the probability of an attack has increased and that it could come as soon as this week, with traders scrambling for protection in options markets. 

“The escalation of the conflict in the Middle East is a clear upside risk to oil prices over the next six months and potentially even longer,” said Vivek Dhar, an analyst with Commonwealth Bank of Australia. Concerns over the state of global balances remain, however, with the OPEC+ alliance likely needing to respond to subdued demand growth while also defending its market share, he said.