Oil pares gains to drop by $1 on US crude inventories; Israel-Iran war curbs losses; Brent down 2% to $75

Oil fell by more than $1 a barrel on Wednesday on rising U.S. crude inventories, while the risk of supply disruption from the Middle East conflict and Hurricane Milton in the United States curbed price declines.

Brent crude futures were down $1.21, or 1.6%, at $75.97 a barrel at 11:05 a.m. EDT (1504 GMT). U.S. West Texas Intermediate (WTI) futures lost $1.07, or 1.5%, to $72.50.

Crude inventories jumped by 5.8 million barrels to 422.7 million barrels last week, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 2 million-barrel rise.

The build, however, was smaller than estimates by trade group American Petroleum Institute on Tuesday, which helped to limit the fall in oil prices, said Bob Yawger, director of oil futures at Mizuho in New York.

Larger-than-expected drawdowns in gasoline and distillates also helped soften the impact to prices, Yawger said.

“There’s a bullish element in the gasoline number, which might have been a rebound from the hurricane,” said Yawger, who was referencing Hurricane Helene, which struck the United States late last month.

The country is now bracing for a second one, Hurricane Milton, which is expected to make landfall as a major storm in Florida on Wednesday. The storm has already driven up demand for gasoline in the state, which has helped support crude prices.

Brent and WTI both gained more than 1% earlier in the session after prices had plunged on Tuesday by more than 4% on a possible Hezbollah-Israel ceasefire, though markets remain wary of a potential Israeli attack on Iranian oil infrastructure.

“Despite the current heightened tensions in the Middle East, it is easy to forget that the oil market is very much vulnerable to corrections due to the ongoing bearish macro narrative centred on China,” said Harry Tchilinguirian, head of research at Onyx Capital Group.

China said on Tuesday it was “fully confident” of achieving its full-year growth target but refrained from introducing stronger fiscal steps, disappointing investors who had banked on more support for the economy.

Investors have been concerned about slow growth dampening fuel demand in China, the world’s largest crude importer.

Weak demand continues to underpin the fundamental outlook. The U.S. Energy Information Administration’s (EIA) on Tuesday downgraded its demand forecast for 2025 on weakening economic activity in China and North America.

Investors are awaiting developments from expected talks between U.S. President Joe Biden and Israeli Prime Minister Benjamin Netanyahu over intensifying conflict in the Middle East.

The oil-producing region has been on high alert for any Israeli response to an Iranian missile attack last week in retaliation for Israel’s military escalation in Lebanon.