Oil prices fell sharply on Wednesday as Russian oil shipments via the Druzhba pipeline to Hungary restarted, prompting the reversal of earlier gains following an attack on an oil tanker off the coast of Oman.
Brent Crude futures fell $1.88, or 2%, to $91.98 a barrel by 1418 GMT, and U.S. West Texas Intermediate (WTI) crude futures slid $2.29, or 2.6%, to $84.63 a barrel.
Both benchmarks rose sharply earlier in the session after a tanker was hit off the coast of Oman on Tuesday, sustaining minor damage, highlighting the geopolitical risks in the world's busiest routes for oil shipments.
Three maritime sources told Reuters that a drone was suspected to have attacked the tanker. An Israeli official said Iran was responsible for the attack, using a Shahed-136 drone, the type it has been supplying to Russia for use in Ukraine.
Prices then retreated after Hungarian Foreign Minister Peter Szijjarto said on Wednesday that flows through the Druzhba pipeline which carries Russian oil to Hungary had resumed following a brief outage.
Oil supply to parts of Eastern and Central Europe via a section of the Druzhba pipeline were temporarily suspended on Tuesday for technical reasons, according to oil pipeline operators in Hungary and Slovakia.
In China, rising COVID-19 cases weighed on sentiment after an easing of virus restrictions this week.
"Oil demand growth in the country is being hampered by its unyielding faith in a zero-tolerance COVID-19 policy and persistent economic weakness," PVM Oil analyst Stephen Brennock said.
The International Energy Agency (IEA) forecast demand growth to slow to 1.6 million bpd in 2023 from 2.1 million bpd this year.
Earlier this week, the Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for 2022 global oil demand growth for a fifth time since April, citing mounting economic challenges.
Industry data showing a bigger-than-expected drop in U.S. crude stockpiles provided some support to oil prices. [API/S]
U.S. crude oil inventories fell by about 5.8 million barrels for the week ended Nov. 11, market sources said, citing American Petroleum Institute figures.
By comparison, seven analysts polled by Reuters estimated on average that crude inventories dropped by about 400,000 barrels.
Official U.S. inventory data from the Energy Information Administration is due at 10:30 a.m. EST (1530 GMT). [EIA/S]
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