Oil Prices Surge Following Significant Losses; Large U.S. Inventory Build Caps Recovery

Oil prices experienced a rebound during Asian trading on Wednesday, recovering some of the significant losses from the previous session. However, concerns over a substantial increase in U.S. oil inventories limited these gains.

On Tuesday, oil prices fell by more than 4% following news that the Lebanese militant group Hezbollah was pursuing a ceasefire with Israel, suggesting a potential easing of tensions in the Middle East. Additionally, dwindling optimism regarding new stimulus measures in China, a major oil consumer, contributed to the decline, as the Chinese authorities opted against introducing stronger fiscal measures in light of slowing economic growth.

As of 21:14 ET (01:14 GMT), prices for crude oil set to expire in December increased by 0.6% to $77.63 per barrel, while another benchmark rose by the same percentage to $73.40 per barrel.

Data indicating a significant rise in U.S. oil inventories further constrained the recovery. According to recent figures, U.S. oil inventories surged by 10.9 million barrels over the last week, far exceeding expectations of a 1.95 million barrel increase. This trend typically foreshadows a similar announcement from the Energy Information Administration, which is expected later on Wednesday, raising concerns about a potential decline in U.S. fuel demand—particularly as the mid-South region is currently recovering from severe hurricanes.

Traders remain vigilant regarding possible disruptions to oil supply due to Hurricane Milton, which is notably one of the most powerful hurricanes recently recorded. The Category 5 storm is predicted to make landfall in Florida this week, although projections suggest it will mostly avoid oil and gas production activities in the Gulf of Mexico.

In the context of the ongoing conflict in the Middle East, oil prices faced pressure from Hezbollah’s call for a ceasefire amid continued Israeli strikes on its leadership. The prospect of a ceasefire could indicate a potential reduction in hostilities, which has been a significant factor supporting oil prices.

Oil markets had previously rallied after missile attacks by Iran and Hezbollah on Israel heightened concerns over a potential escalation of the Israel-Hamas conflict, which might disrupt oil production in the region. Traders remain anxious about the possibility of Israel targeting Iranian oil facilities, an action that could signify a serious escalation in the conflict.