Oil futures headed lower on Wednesday after Poland and NATO reportedly said there was no indication that Russia was behind a missile strike in Poland, easing worries about risks to crude supplies in the region.
Prices for oil in Europe, meanwhile, got a brief boost after reports of a drone strike on an oil tanker off the coast of Oman.
Trader also weighed U.S. government data released Wednesday showing a larger-than-expected weekly decline in domestic crude inventories, along with gains in gasoline and distillate stocks.
West Texas Intermediate crude for December delivery
fell $1.59, or 1.8%, to $85.33 a barrel on the New York Mercantile Exchange after gaining 1.2% on Wednesday.
January Brent crude
declined by $1.21, or 1.3%, to $92.65 a barrel on ICE Futures Europe.
lost 1.2% to $2.4861 a gallon, while December heating oil
traded at $3.623 a gallon, down 0.5%.
December natural gas
was down 3.4% at $5.832 per million British thermal units.
Tuesday’s “geopolitical fear bid related to the initially unidentified missiles hitting Poland is unwinding as details emerge that suggest the projectiles did not actually originate in Russia after all,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.
A missile had landed in Polish farmland Tuesday, killing two people, but Poland said Wednesday that there was no indication that the missile was an intentional attack on the NATO country, according to a report from The Associated Press. Polish President Andrzej Duda said it was highly probable that one of Ukraine’s defense missiles had fallen on Polish territory, and NATO Secretary-General Jens Stoltenberg, agreed with the assessment, the report said.
An “uptick in geopolitical risk” had helped drive oil prices higher late Tuesday, following news of the missile strike in Poland, said Stephen Innes, managing partner at SPI Asset Management, in a market update.
With “crude oil at the epicentre of Eastern European risk oil,” traders had little choice but to “graduate what-if scenarios hedging the potential risk to global oil supplies” if a smouldering powder keg ignites, he said.
Also early Wednesday, oil prices in London briefly saw some support, said Innes, after an oil tanker associated with an Israeli billionaire was struck by bomb-carrying done of the coast of Oman amid heightened tensions with Iran, an official told The Associated Press.
But “these lone-wolf attacks tend to be less influential or have long legs,” said Innes, given that “China’s COVID-19 cases continue to rise, suggesting more lockdowns ahead of the holiday and flu season.”
Oil traders on Tuesday had spent the bulk of the session digesting information from the International Energy Agency’s latest monthly oil report.
The Paris-based agency warned that more than 1 million barrels a day of Russian oil exports will be upended within weeks, with a European ban on Russia crude oil imports and a plan to cap prices for Russian crude-oil sales going into effect. It also raised its global oil demand forecast for this year by 170,000 barrels a day to 99.8 million barrels a day and for next year by 130,000 barrels a day to 101.4 million barrels a day.
A drop in last week’s U.S. crude inventories reported by the Energy Information Administration on Wednesday offered little support to oil prices.
The EIA said domestic crude inventories fell by 5.4 million barrels for the week ended Nov. 11. On average, analysts forecasted a decline of 400,000 barrels, according to a poll conducted by S&P Global Commodity Insights. Late Tuesday, the American Petroleum Institute, a trade group, reported a decline of 5.8 million barrels in crude supplies, according to various sources.
The crude oil numbers were “rather mixed,” said Tariq Zahir, managing member at Tyche Capital Advisors, with a larger draw in crude than expected and product markets seeing a larger build in gasoline and a build in heating oil.
The EIA showed weekly inventory increases of 2.2 million barrels for gasoline and 1.1 million barrels for distillates. The analyst survey had called for decreases of 800,000 barrels for gasoline and 500,000 barrels for distillates.
Crude stocks at the Cushing, Okla., Nymex delivery hub fell by 1.6 million barrels for the week, the EIA said, while oil supplies in the Strategic Petroleum Reserve declined by 4.1 million barrels.
“With the severe shortage of heating oil here on the east coast and the situation continuing to evolve in Poland/Ukraine, we feel energy markets will be driven by headlines with volatility to remain quite elevated,” said Zahir. “We do feel the risk is to the upside in the short to medium term.”