Investing.com – Oil prices fell sharply lower on Wednesday as a much larger-than-expected buildup of inventories raised concerns about oil demand, while the focus remained on US diplomatic efforts to defuse tensions in the Middle East suppress.
At 2:30 PM ET (6:30 GMT), the stock was down 1.4% at $70.52 per barrel, while the stock was down 1.4% at $75.02 per barrel.
US stocks rose last week – API
Data from the report showed that U.S. oil inventories grew by 5.47 million barrels in the week ended Oct. 18, compared with expectations for an increase of 0.8 million barrels.
The much higher-than-expected construction led to some concerns that U.S. fuel demand would cool if it matched industry figures.
Oil prices were also under pressure from the US central bank’s recent strength, as expectations of a smaller rate cut from the Federal Reserve pushed the dollar to its strongest level since early August.
Raw materials, like many other commodities, are denominated in dollars, so a stronger dollar makes it more expensive for foreign buyers.
Conflicts in the Middle East provide support
Crude oil prices gained some ground in the previous two sessions, offsetting last week’s losses of more than 7%, while tensions remained high in the Middle East after Israel said it had killed Hashem Safieddine, heir to the throne of late Hezbollah leader Hassan Nasarallah. who was killed by an Israeli attack last month.
US Secretary of State Antony Blinken has held extensive talks with Israeli leaders this week about a possible de-escalation of the conflict, but his diplomacy has so far yielded little results.
“The uncertainty of how this will play out would make speculators wary of shorting the market, which speculators had been doing before this latest escalation, due to demand concerns and the bearish outlook for 2025,” analysts at ING in a note.
Oil will remain around $76 per barrel in 2025 – Goldman Sachs
Oil prices are expected to average around $76 a barrel in 2025, Goldman Sachs analysts said in a recent note, with markets seeing a moderate surplus of crude and spare capacity at major producers to offset any supply disruptions.
The investment bank said the risk premium for crude oil due to tensions in the Middle East was limited as tensions between Iran and Israel had so far not affected oil supplies from the region.
Goldman analysts also noted that major producers in the Organization of the Petroleum Exporting Countries, as well as their allies, had ample spare capacity. The cartel last week lowered its oil demand forecasts for 2024 and 2025 and will start increasing production later this year.
(Peter Nurse, Ambar Warrick contributed to this article.)
