09:02 AM EDT, 07/09/2025 (MT Newswires) -- Oil prices edged higher early on Wednesday after Houthi militants attacked and sunk a cargo ship in the Red Sea, though an unexpected rise in U.S. inventories last week offered a counter to the safe-haven demand.

West Texas Intermediate crude oil for August delivery was last seen up US$0.07 to US$68.40 per barrel, while September Brent crude was up US$0.07 to US$70.22.

The Houthis on Tuesday attacked and sunk the Eternity C, a Liberian-flagged cargo ship, using small boats and drones, with the Associated Press reporting at least three deaths among the crew while a search is continuing for survivors. The attack follows the Monday sinking of the Greek-owned cargo carrier Magic Seas as the Iran-backed Houthis resume attacks on Red Sea shipping that began in 2023.

"The geopolitical tension once again rising from Houthi attacks in the Red Sea," PVM Oil Associates noted.

Safe-haven demand is offset by rising inventories. In its weekly survey the American Petroleum Institute reported U.S. oil inventories spiked by 7.1-million barrels last week while analysts polled by Oilprice.com expected a drop of 2.8-million barrels. It was the second-straight weekly rise in U.S. oil inventories reported by the group, while traders await official inventory data from the Energy Information Administration (EIA) later on Wednesday morning.

The EIA released its monthly Short-Term Energy Outlook on Tuesday, as it forecast a drop in U.S. oil production as lower oil prices discourage drilling. It expects U.S. output to drop from a record 13.4-million barrels per day in the second quarter to 13.3-million bpd by the final quarter of 2026.

However the agency also said it expects global production to rise by 1.8-million bpd this year, well ahead of its forecast for a demand rise of 0.8-million bpd, with the surplus refilling global inventories that had been depleted by OPEC+ production cuts.

"Although the geopolitical risk premiums have risen, we still anticipate global oil inventories will grow significantly over the forecast period and put downward pressure on oil prices. Global oil inventories increased by an estimated 1.2 million barrels per day (b/d) in 1H25, and we expect they will increase by an average of 0.9 million b/d for the remainder of the year. We expect global oil inventory builds will average 1.1 million b/d in 2026," the report said.