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Oil Slips as Strong Supply Counters Middle East, Hurricane Risk

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
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Oil Slips as Strong Supply Counters Middle East, Hurricane Risk

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil prices erased early gains on Wednesday as weak demand fundamentals and rising supply countered elevated risk of supply disruption from conflict in the Middle East and Hurricane Milton in the United States.

Brent crude futures were down 36 cents, or 0.47%, at $76.82 a barrel by 1103 GMT while US West Texas Intermediate (WTI) futures lost 43 cents, or 0.58%, to $73.14, Reuters reported.

Brent and WTI both gained more than 1% earlier in the session after prices had plunged on Tuesday by more than 4% on a possible Hezbollah-Israel ceasefire, though markets remain wary of a potential Israeli attack on Iranian oil infrastructure.

"Despite the current heightened tensions in the Middle East, it is easy to forget that the oil market is very much vulnerable to corrections due to the ongoing bearish macro narrative centred on China," said Harry Tchilinguirian, head of research at Onyx Capital Group.

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 on weakening economic activity in China and North America.

US crude oil stocks rose by nearly 11 million barrels last week, much more than analysts polled by Reuters had expected, according to market sources citing American Petroleum Institute figures on Tuesday.

"Such a backdrop belies the war premium in oil prices at present, but it would be a brave soul indeed to dismiss what will happen to oil prices if Israel does the unthinkable and targets Iran's oil sector," said John Evans at oil broker PVM.

Investors are awaiting developments from 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 war on Lebanon.

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Russia's Central Bank Holds Off on Interest Rate Hike

People skate at an ice rink installed at the Red Square decorated for the New Year and Christmas festivities, with the St. Basil's Cathedral, left, and the Kremlin, right, in the background in Moscow, Russia, Friday, Dec. 20, 2024. (AP Photo/Alexander Zemlianichenko)
People skate at an ice rink installed at the Red Square decorated for the New Year and Christmas festivities, with the St. Basil's Cathedral, left, and the Kremlin, right, in the background in Moscow, Russia, Friday, Dec. 20, 2024. (AP Photo/Alexander Zemlianichenko)
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Russia's Central Bank Holds Off on Interest Rate Hike

People skate at an ice rink installed at the Red Square decorated for the New Year and Christmas festivities, with the St. Basil's Cathedral, left, and the Kremlin, right, in the background in Moscow, Russia, Friday, Dec. 20, 2024. (AP Photo/Alexander Zemlianichenko)
People skate at an ice rink installed at the Red Square decorated for the New Year and Christmas festivities, with the St. Basil's Cathedral, left, and the Kremlin, right, in the background in Moscow, Russia, Friday, Dec. 20, 2024. (AP Photo/Alexander Zemlianichenko)

Russia's central bank has left its benchmark interest rate at 21%, holding off on further increases as it struggles to snuff out inflation fueled by the government's spending on the war against Ukraine.
The decision comes amid criticism from influential business figures, including tycoons close to the Kremlin, that high rates are putting the brakes on business activity and the economy.
According to The Associated Press, the central bank said in a statement that credit conditions had tightened “more than envisaged” by the October rate hike that brought the benchmark to its current record level.
The bank said it would assess the need for any future increases at its next meeting and that inflation was expected to fall to an annual 4% next year from its current 9.5%
Factories are running three shifts making everything from vehicles to clothing for the military, while a labor shortage is driving up wages and fat enlistment bonuses are putting more rubles in people's bank accounts to spend. All that is driving up prices.
On top of that, the weakening Russian ruble raises the prices of imported goods like cars and consumer electronics from China, which has become Russia's biggest trade partner since Western sanctions disrupted economic relations with Europe and the US.
High rates can dampen inflation but also make it more expensive for businesses to get the credit they need to operate and invest.
Critics of the central bank rates and its Governor Elvira Nabiullina have included Sergei Chemezov, the head of state-controlled defense and technology conglomerate Rostec, and steel magnate Alexei Mordashov.
Russian President Vladimir Putin opened his annual news conference on Thursday by saying the economy is on track to grow by nearly 4% this year and that while inflation is “an alarming sign," wages have risen at the same rate and that "on the whole, this situation is stable and secure.”
He acknowledged there had been criticism of the central bank, saying that “some experts believe that the Central Bank could have been more effective and could have started using certain instruments earlier.”
Nabiullina said in November that while the economy is growing, “the rise in prices for the vast majority of goods and services shows that demand is outrunning the expansion of economic capacity and the economy’s potential.”
Russia's military spending is enabled by oil exports, which have shifted from Europe to new customers in India and China who aren't observing sanctions such as a $60 per barrel price cap on Russian oil sales.