Investing.com– Oil prices settled lower Wednesday as a larger-than-expected jump in supplies offset ongoing supply disruptions concerns stemming from ongoing conflict in the Middle East and imminent landfall of Hurricane Milton in the United States.
At 2:30 p.m. ET (1830 GMT), fell 0.3% to $76.94 a barrel, while dropped 0.4% to $73.28 a barrel.
EIA data shows bumper build in US inventories
Data from the showed U.S. oil inventories grew by 5.8 million barrels in the past week, much more than expectations for a build of 2.0 million barrels.
Product inventories fell more than expected, with gasoline down 6.3M barrels and distillates down 3.1M barrels. The draw in gasoline stocks was the largest of the year so far following a surge in demand, likely driven by stockpiling ahead of Hurricane Milton, which is slated to make landfall in Florida as a major storm on Wednesday or early Thursday.
Traders were watching for any potential disruptions in oil supply from Hurricane Milton, one of the strongest hurricanes seen in recent history.
Middle East risk premium eases
Oil prices plummeted more than 4% on Tuesday following reports that Lebanese military group Hezbollah was seeking a ceasefire with Israel, pointing to a potential de-escalation in the Middle East conflict.
Geopolitical risk premium gauges in the oil market have decreased slightly this week, following sharp increases last week in both implied volatility and call options implied volatility skew, Goldman Sachs said.
Goldman Sachs still expects a peak upside of $10-$20 per barrel for Brent in the case of disruptions in Iranian production as the development of the conflict remains uncertain.
However, in the absence of major disruptions, prices could stabilize around current levels this quarter, the bank said in a note dated Tuesday.
Chinese demand worries weigh
Waning optimism over new stimulus measures in top oil importer China also weighed, after authorities declined to introduce stronger, fiscal stimulus measures to shore up slowing growth.
The second-largest economy in the world has been struggling in the face of sluggish consumer spending and a real estate crisis. Before the Golden Week holiday, the Chinese government had rolled out a string of stimulus measures, including interest rate cuts, and the market had wanted more of the same at the start of the new week.
(Peter Nurse, Ambar Warrick contributed to this article.)