LONDON (Reuters) -Oil prices were largely steady on Wednesday, near their highest levels in seven weeks as the market weighed concerns over escalating conflicts against demand worries following an unexpected build in U.S. crude inventories.

Brent crude futures eased 34 cents to $84.99 a barrel by 0832 GMT, while U.S. West Texas Intermediate crude was down 43 cents to $81.14 per barrel.

U.S. crude stocks rose by 2.264 million barrels in the week ended June 14, according to market sources, citing American Petroleum Institute figures on Tuesday. Analysts polled by Reuters had expected a 2.2 million barrel draw in crude stocks.

Gasoline inventories, however, fell by 1.077 million barrels, while distillates rose by 538,000 barrels, the sources said, speaking on condition of anonymity. [API/S]

Official U.S. stocks data from the Energy Information Administration is due at 1500 GMT.

Both benchmarks gained more than $1 in the previous session after a Ukrainian drone strike led to an oil terminal fire at a major Russian port, according to Russian officials and a Ukrainian intelligence source.

In the Middle East, Israeli Foreign Minister Israel Katz warned of a possible "all out war" with Lebanon's Hezbollah, even as the U.S. attempted to avoid a broader conflict between Israel and the Iran-backed group.

An escalating war risks supply disruption in the key oil-producing region.

Oil prices had recovered strongly in the last two weeks as the market weighed those concerns "in the event of a wider conflict, as geopolitical tensions are brought to a new front between Israel and Hezbollah," said Yeap Jun Rong, a market strategist at IG in Singapore.

"Any cooling off between both parties seems difficult in the near term, which may keep oil prices well-supported as market participants shrug off pockets of weakness on the economic front, from weaker-than-expected U.S. retail sales to mixed sets of data out of China this week."

China data this week showed May industrial output lagged expectations, but retail sales, a gauge of consumption, marked their quickest growth since February.

(Additional reporting by Laila Kearney in New York and Emily Chow in Singapore; Editing by Sonali Paul, Miral Fahmy, Jamie Freed and Sharon Singleton)