Oil Dips Despite Israel Stating Its Strike Against Iran Will Be "Especially Surprising"

Meanwhile, China continues to disappoint analysts: File Image/Pixabay

Oil demand sentiment on Wednesday again proved to be shaky within the investment community, as two key commodities dropped over concerns of rising U.S. stockpiles – which outshone worries about Hurricane Milton and the Middle East hostilities.

As the force 4 hurricane barrelled towards Florida and Israel plotted a strike against Iran, Brent settled down 60 cents at $76.58 per barrel, while West Texas Intermediate settled down 33 cents at $73.24 per barrel.

According to the Energy Information Administration, crude inventories rose by 5.8 million barrels to 422.7 million barrels last week, compared to expectations for a 2 million increase.

However, the EIA also reported larger than expected gasoline and distillates drawdowns (6.3 million barrels for the former), which analysts such as Bob Yawger, director of oil futures at Mizuho, dismissed as a rebound from last month's Hurricane Helene.

Hopes during the previous session that a Hezbollah/Israel ceasefire could be reached – which caused oil prices to plummet by over 4 percent – seemed to evaporate on Wednesday as headlines focused on a potential Israeli attack on Iranian oil infrastructure.

According to Israeli media, Israel defense minister Yoav Gallant said his country's strike will be "lethal, precise and especially surprising."

Meanwhile, Bloomberg noted that "concerns over China's economy continue to linger, and the lack of fresh major stimulus from Beijing this week prompted a broad market selloff on Tuesday, including in oil; the central government said it would hold a new briefing on fiscal policy on Saturday."

Ryan Grabinski, managing director and investment strategist at Strategas, told clients in a note on Wednesday that downside risk is elevated as the rally got "out over its skis," and "From here, durable forms of supply disruption need to occur to see further advances for energy."