Investing.com-- Oil prices fell slightly Wednesday as demand concerns countered the risk of supply disruption from conflict in the Middle East and Hurricane Milton in the United States.
At 07:55 ET (11:55 GMT), Brent oil futures fell 0.3% to $76.94 a barrel, while West Texas Intermediate crude futures dropped 0.4% to $73.28 a barrel.
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 Brent implied volatility and call options implied volatility skew, Goldman Sachs (NYSE:GS) 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.
API data shows bumper build in US inventories
Data from the American Petroleum Institute showed U.S. oil inventories grew by 10.9 million barrels in the past week, much more than expectations for a build of 1.95 million barrels.
The reading usually heralds a similar trend from official inventory data, which is due later on Wednesday, and sparked some concerns that U.S. fuel demand was cooling, especially as the country’s mid-South grappled with a series of devastating hurricanes.
Traders were watching for any potential disruptions in oil supply from Hurricane Milton, one of the strongest hurricanes seen in recent history. The category-5 storm is set to make landfall in Florida this week, but is expected to largely dodge most oil and gas operations in the Gulf of Mexico.
(Ambar Warrick contributed to this article.)