International crude oil prices pared early gains from the session and extended losses for the second straight day to drop by more than $1 per barrel on Wednesday, October 9. The decline was led by the rising US crude inventories, while the risk of supply disruption from the Middle East conflict between Israel and Iran as well as Hurricane Milton in the US, which curbed price declines.

Brent crude futures were last down $1.21, or 1.6 per cent, at $75.97 a barrel. US West Texas Intermediate (WTI) futures lost $1.07, or 1.5 per cent, to $72.50. Back home, crude oil futures traded 0.59 per cent higher at ₹6,155 per barrel on the multi commodity exchange (MCX). Brent and WTI both gained more than one per cent earlier in the session after prices had plunged on Tuesday by more than four per cent on a possible Hezbollah-Israel ceasefire, though markets remain wary of a potential Israeli attack on Iranian oil infrastructure. 

Oil sheds 5% over possible ceasefire reports in Lebanon after Israel-Iran war stokes supply fears, Brent drops to $77

Crude oil down $1: What's weighing on prices?

-Crude inventories jumped by 5.8 million barrels to 422.7 million barrels last week, the Energy Information Administration said, compared with analysts' expectations in a poll conducted by news agency Reuters for a two million-barrel rise. The build, however, was smaller than estimates by trade group American Petroleum Institute on Tuesday, which helped to limit the fall in oil prices.

-Analysts said larger-than-expected drawdowns in gasoline and distillates also helped soften the impact to prices. The bullish element in the gasoline number, which might have been a rebound from the Hurricane Helene that stuck US last month.

-The country is now bracing for a second one, Hurricane Milton, which is expected to make landfall as a major storm in Florida on Wednesday. The storm has already driven up demand for gasoline in the state, which has helped support crude prices.

Oil soars 10% in five days, logs biggest weekly gain in one year over Israel-Iran war; Brent sits at $78/bbl

-Analysts said despite the current heightened tensions in the Middle East especially Israel and Iran, it is easy to forget that the oil market is very much vulnerable to corrections due to the ongoing bearish macro narrative centered on China.

-China said on Tuesday it was "fully confident" of achieving its full-year growth target but refrained from introducing stronger fiscal steps, disappointing investors who had banked on more support for the economy. Investors have been concerned about slow growth dampening fuel demand in China, the world's largest crude importer.

-Weak demand continues to underpin the fundamental outlook. The US Energy Information Administration's (EIA) on Tuesday downgraded its demand forecast for 2025 over the weakening economic activity in China and North America.

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-Investors are awaiting developments from the expected talks between US President Joe Biden and Israeli Prime Minister Benjamin Netanyahu over intensifying conflict in the Middle East. The oil-producing region has been on high alert for any Israeli response to an Iranian missile attack last week in retaliation for Israel's military escalation in Lebanon.

Where are prices headed?

Analysts said the demand concerns from China weighed on crude oil as there were no fresh stimulus measures announced following the reopening of Chinese markets after a week-long holiday, which also saw a plunge in Chinese equities, adding pressure to oil prices. 

"Hurricane threats from Hilton and strong US economic data are providing some support at lower levels. We expect crude oil prices to remain volatile during today’s session. Crude oil has support at $72.50-$71.80 and resistance at $73.90-$74.50. In INR terms, crude oil has support at ₹6,160- ₹6,100, with resistance at ₹6,310- ₹6,400," said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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