By Georgina McCartney
HOUSTON (Reuters) -Oil prices fell on Wednesday and gasoline inventories rose more than expected last week, but losses were limited by concerns about the intensifying war between major oil producer Russia and Ukraine.
January futures fell 50 cents, or 0.68%, to $72.81. U.S. West Texas Intermediate crude oil futures for December expired on Wednesday, falling 52 cents, or 0.75%, to $68.87, while the more active WTI contract for January fell 49 cents, or 0.71%, to $68.75.
U.S. oil and gasoline inventories rose more than expected last week, data from the Energy Information Administration showed, weighing on prices.
To further boost supply, Norway’s Equinor said it had restored full production capacity from the Johan Sverdrup oil field in the North Sea after a power outage.
Weak demand at the world’s top crude importer continued, with Chinese stimulus announcements failing to boost oil demand growth in the near term, Macquarie energy strategists said in a note.
The conflict between Russia and Ukraine and concerns about future oil supply disruptions helped keep prices underground.
“These supply risks are certainly maintaining support here and to some extent offsetting concerns about the global demand outlook,” said John Kilduff, partner at Again Capital in New York.
Ukraine fired a volley of British Storm Shadow cruise missiles at Russia on Wednesday, the latest Western weapon it has been authorized to use on Russian targets, a day after firing US ATACMS missiles.
This has brought geopolitical risk back into the market, StoneX energy analyst Alex Hodes said in a note on Wednesday.
But long positions in WTI have fallen significantly despite the added geopolitical risk, according to Aegis Hedging associate Christian Drolshagen, with hedge funds holding just 50% of summer levels, according to CFTC data.
Elsewhere, the US on Wednesday vetoed a UN Security Council resolution on a ceasefire in Gaza, raising the war risk premium on oil prices amid concerns about potential supply disruptions as the war in the Middle East intensifies continues.
“The market is very nervous, something could happen with another escalation between the Israelis and Iranians,” said Kilduff of Again Capital.
“Everyone is focused on letting go of (newly elected US President Donald) Trump and the US producers, but the downside of that is that sanctions will definitely come back into the market in terms of what happens next with Iranian supplies and their ability to to export. he added.
Global supply could come under further pressure, with OPEC+ possibly cutting production increases again when it meets on December 1 due to weak global oil demand, according to three OPEC+ sources familiar with the discussions.
