Oil Prices Settle Lower Amid Supply Concerns

Oil prices settled lower on Wednesday as a larger-than-expected rise in U.S. crude supplies offset ongoing concerns regarding supply disruptions from the Middle East conflict and Hurricane Milton in the U.S.

At 2:30 p.m. ET (1830 GMT), Brent oil futures fell 0.3% to $76.94 a barrel, while West Texas Intermediate crude futures dropped 0.4% to $73.28 a barrel.

EIA Data Shows Bumper Build in U.S. Inventories

Data from the Energy Information Administration indicated that U.S. oil inventories rose by 5.8 million barrels last week, significantly exceeding the anticipated increase of 2.0 million barrels.

Product inventories saw more-than-expected declines with gasoline down 6.3 million barrels and distillates down 3.1 million barrels. The gasoline stock draw was the largest of the year, driven by increased demand likely due to stockpiling ahead of Hurricane Milton, projected to make landfall in Florida as a major storm.

Traders remained alert for potential oil supply disruptions caused by Hurricane Milton, noted as one of the strongest hurricanes in recent history.

Middle East Risk Premium Eases

Oil prices dropped over 4% on Tuesday after news that Hezbollah was seeking a ceasefire with Israel, hinting at potential de-escalation in the Middle East conflict.

Geopolitical risk premium indicators in the oil market decreased slightly this week after previous sharp increases. Goldman Sachs predicts a potential peak of $10-$20 per barrel for Brent if Iranian production faces disruptions, though prices may stabilize around current levels this quarter without major interruptions.

Chinese Demand Worries Weigh

Concern over demand from China also impacted prices, with diminishing expectations for new stimulus measures as authorities opted not to introduce stronger fiscal support to bolster slowing growth.

China, the second-largest economy, continues to struggle with sluggish consumer spending and a real estate crisis despite earlier stimulus efforts before the Golden Week holiday, including interest rate cuts. The market anticipated additional measures at the beginning of the week.