Oil prices slip as strong supply counters risks

Reuters/Mohammed Aty

Oil prices slipped during trading on Wednesday as weak demand fundamentals and rising supply countered the elevated risk of supply disruption from conflict in
the Middle East and Hurricane Milton in the United States.

Brent crude futures fell cents, or 0.47 percent, to $76.82 a barrel by 11:03 GMT. US West Texas Intermediate futures were down 43 cents to $73.14 a barrel.

Prices had plunged more than 4 percent in the previous session on a possible Hezbollah-Israel ceasefire, but markets remain wary of a potential Israeli attack on Iran’s oil infrastructure.

“The everyday dilemma of ‘Middle Eastern headlines’ moving like a pendulum between ‘ceasefire talks’ and ‘further escalation in attacks’ has been distracting investors from reality,” said Phillip Nova senior market analyst Priyanka Sachdeva in an email.

“Oil markets are twirled in sentiments of ‘buying the rumour’ and sidelining the real fundamentals that should matter,” said Sachdeva.

The sell-off on Tuesday followed a rally that began after Iran launched a missile barrage at Israel on October 1, culminating in an 8 percent gain on the week on Friday, the largest in over a year.

Hezbollah officials on Tuesday appeared to back off from a truce in Gaza as a condition for a ceasefire in Lebanon. Hezbollah’s deputy leader Naim Qassem said he backed attempts to secure a truce in a televised speech, the first time the end of the war in Gaza was not mentioned as a pre-condition.

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On the demand front, data showed US crude oil stocks rose by nearly 11 million barrels last week, much more than analysts polled by Reuters had expected, according to market sources citing American Petroleum Institute figures on Tuesday. However, fuel stockpiles fell.

The US EIA on Tuesday downgraded its 2024 forecast for global oil demand growth by 20,000 barrels per day to 103.1 million bpd, because of weaker industrial production and manufacturing growth in the US and China.

Concerns about a lack of further stimulus measures by Beijing to boost China’s economy also capped oil market gains. Officials offered few new details at a press conference on Tuesday.

“China has a part to play as well, with a lack of new stimulus bringing some disappointment. Many market participants were hoping that its fiscal policies will follow in the footstep of the financial ‘bazooka’ delivered in late-September, but there was clearly a step-down in yesterday’s announcement,” said IG market strategist Yeap Jun Rong.