Oil prices fell on Wednesday after data showed U.S. crude inventories rose by more than expected even as refining activity rebounded, though futures remained up about 2% this week as traders factored in continuing conflict in the Middle East.
Brent crude futures settled at $74.96, down $1.08, or 1.42%. U.S. West Texas Intermediate crude futures settled down 97 cents, or 1.35%, to $70.77.
Last week oil fell more than 7% on worries about Chinese demand and easing worries about potential disruptions of Middle East oil supplies. Oil settled higher the first two sessions this week as buyers emerged.
U.S. crude inventories rose by 5.5 million barrels to 426 million barrels in the week ended Oct. 18, the Energy Information Administration reported on Wednesday, exceeding analysts’ expectations in a Reuters poll for a 270,000-barrel rise.
“The large crude oil inventory build this week is offsetting the drop last week. But a lot of this is a result of the rebound in crude oil imports, a lot of it had to do with the hurricane,” said Andrew Lipow, president of Lipow Oil Associates, referring to the previous week’s drawdown due to lower imports and demand post Hurricane Milton.
Refinery runs climbed further as facilities exited from seasonal fall maintenance, yielding a build in gasoline while distillates showed a minor draw last week, analysts said.
Also pressuring oil prices, the dollar index rose to its highest since late July. A firmer U.S. currency can hurt demand for dollar-denominated oil from buyers using other currencies.
The impact of the crude stocks build on prices was countered somewhat by persistent concerns over potential oil supply risk from conflict in the Middle East.
“The market continues to wait for Israel’s response to Iran’s missile attack,” ING analysts said, noting the lack of any outcome from U.S. Secretary of State Antony Blinken’s latest visit to Israel.
Blinken pushed on Wednesday for a halt to fighting between Israel and militant groups Hamas and Hezbollah, but heavy Israeli air strikes on a Lebanese port city Tyre demonstrated no respite.
“Market participants priced for the Middle East conflict to drag for longer, with a ceasefire deal potentially seeing some gridlock,” said IG market strategist Yeap Jun Rong.