By After two sessions of gains, crude oil prices slipped on Wednesday as inventories in the US rose more than expected for the week ended Friday.
The private data from the American Petroleum Institute (API) showed that oil inventories in the country rose by 1.64 million barrels last week.
Analysts had expected crude oil inventories in the US to have risen by 900,000 barrels last week.
At the time of writing, the price of West Texas Intermediate crude oil was at $70.94 per barrel, down 1.1% from the previous close. Brent crude oil on Intercontinental Exchange was down over 1% at $75.26 per barrel.
Rising inventories weigh on prices
Rising inventories in the US have hurt oil prices on Wednesday as the market was expecting a relatively smaller build last week.
The US is the world’s largest producer of crude oil. Production in the country hovers around 13 million barrels per day.
In the week ended October 11, production rose to a record high of 13.5 million barrels per day in the US, according to Energy Information Administration (EIA) data.
Meanwhile, refined products saw draws with gasoline and distillate fuel oil inventories falling by 2 million barrels and 1.5 million barrels, respectively, the API data showed.
The official government weekly inventory data for crude oil inventories in the US will be released by EIA later on Wednesday.
Focus on Middle East
The uncertainties surrounding the conflict in the Middle East have been supporting crude oil prices.
The strength in prices on Tuesday stemmed from the lack of any outcome from US Secretary of State Antony Blinken’s latest visit to Israel, Warren Patterson, head of commodities strategy at ING Group, said.
“There had been hopes that following the killing of Hamas leader, Yahya Sinwar, there could be some de-escalation in the war,” he added.
On top of this, the market continues to wait for Israel’s response to Iran’s attack.
Patterson said:
The uncertainty around how this plays out would leave speculators hesitant to short the market, something speculators had been before this most recent escalation, due to demand concerns and a bearish 2025 outlook.
Goldman Sachs sees oil prices averaging $76/barrel in 2025
On Tuesday, Goldman Sachs said that it expects crude oil prices to average $76 per barrel in 2025.
The forecast assumes a moderate surplus in the market along with a significant oil output spare capacity among major members of the Organization of the Petroleum Exporting Countries and allies.
Reuters quoted Goldman Sachs in a report:
Overall, we still see the medium-term risks to our $70-85/bbl range as two-sided but skewed moderately to the downside on net as downside price risks from high spare capacity and potentially broader trade tariffs outweigh upside price.
The investment bank said that geopolitical risk premium is limited at present as the Israel-Iran conflict has not affected supply from the region.
However, it also said that concerns over supply would remain as long as the war continues in the Middle East, which is home to more than half of the world’s oil reserves.
China raises crude oil import quota
The Chinese government has increased the 2025 crude oil import quota for private refiners by 6% year-on-year to 257 million tons, which is a little over 5.1 million barrels per day, according to ING Group.
China has raised the quota after keeping it unchanged for four consecutive years.
“The higher quota comes as new refining capacity ramps up, while quotas could still be adjusted depending on demand and capacity,’ Patterson said.
However, refiners that have not imported oil for the last two years will not be allotted any quotas.
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