SINGAPORE, Aug 5 (Reuters) - Oil prices edged higher on Thursday, supported by tensions in the Middle East, but failed to regain most of the previous day's losses after a surprise build in crude stockpiles in the United States, the world's top oil consumer.
Brent crude oil futures rose by 14 cents, or 0.2%, to $70.52 a barrel by 0132 GMT, while U.S. West Texas Intermediate $(WTI)$ crude futures increased by 18 cents, or 0.3%, to $68.33 a barrel. Both benchmarks fell by more than $2 a barrel on Wednesday.
Israeli aircraft struck what its military said were rocket launch sites in south Lebanon early on Thursday in response to earlier projectile fire towards Israel from Lebanese territory.
Two rockets launched from Lebanon on Wednesday struck Israel, which initially responded with artillery fire amid heightened regional tensions over an alleged Iranian attack on an oil tanker in the Gulf last week.
The exchange came after an attack last Thursday that Israel blamed on Iran on a tanker off the coast of Oman. Two crew members, a Briton and a Romanian, were killed. Iran denied any involvement.
The U.S. State Department said on Wednesday it believed Iranians hijacked the Panama-flagged Asphalt Princess tanker in the Gulf of Oman but was not in a position to confirm.
Helping check gains, a rise in locally transmitted COVID-19 cases in China, the world's second largest oil consumer, that has promped restrictions in some cities and cancellation of flights is threatening demand, analysts said.
Prices also fell steeply in the previous session after the U.S. Energy Information Administration said crude stockpiles rose by an unexpected 3.6 million barrels last week.
Still, some analysts pointed to a bigger-than-forecast 5.3 million barrel fall in fuel stockpiles.
"The fall in U.S. gasoline stockpiles to the lowest level since November 2020 suggests that fuel demand conditions in the U.S. are still quite resilient," analysts from Commonwealth Bank of Australia said in a note on Thursday.
The bank expects Brent oil prices to rise to $85 a barrel by the fourth quarter as oil demand outpaces supply growth.
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