Investing.com– Oil prices fell Wednesday, cooling after optimism over more stimulus measures in China sparked strong gains in the prior session. 

At 07:25 ET (11:25 GMT), fell 0.9% to $73.78 a barrel, while dropped 1.1% to $70.75 a barrel. 

Boost after China stimulus wanes 

The People’s Bank of China unveiled a slew of stimulus measures on Tuesday, including increased liquidity measures and looser restrictions on the property market. 

The move pushed up hopes that economic growth in the world’s largest oil importer will improve, sparking a 1.7% rally in oil during the session.

But analysts argued that more measures were needed from Beijing to shore up sluggish growth. China has rolled out monetary stimulus repeatedly over the past three years, to little effect.

“Yesterday’s monetary stimulus package is far from being sufficient on its own. In our view, an aggressive fiscal policy is required,” analysts at ANZ wrote in a note.

US inventories shrink – API

Data from the showed U.S. oil inventories shrank by 4.339 million barrels (mb) in the week to September 20, much more than expectations for a draw of 1.1 mb. 

The API data usually signals a similar reading from , which is due later in the day. 

U.S. inventories were seen remaining tight as supply disruptions due to storms in the Gulf of Mexico offset slower fuel demand after the end of the travel-heavy summer season.

Hurricane Helene is set to make its way through the Gulf in the coming days – the second major storm to hit the area in a month. 

OPEC offers bullish outlook

OPEC raised its forecasts for world oil demand for the medium and long term in an annual outlook, according to a report released Tuesday.

“Future energy demand is found in the developing world due to increasing populations, middle class and urbanization,” said OPEC Secretary General Haitham Al Ghais during the report’s launch in Brazil.

OPEC expects global oil consumption to increase to 112.3m bbls/day in 2029 and further to 120.1m bbls/day by 2050 compared to 102.2m bbls/d in 2023.

“The demand growth slows down post-2030, however the organisation does not expect the peak of oil demand in the foreseeable future even as investments in alternate fuels have increased,” said analysts at ING, in a note. “On the other hand, OPEC sees US supply peaking by 2030 and declining gradually later on as shale oil production falls.”

(Ambar Warrick contributed to this article.)

By Arunima Kumar

(Reuters) – Oil prices fell more than 1% on Wednesday as investors reassessed whether China’s latest stimulus plans will be able to boost its economy and spur fuel demand in the world’s largest crude importer.

Still, declining oil and fuel stockpiles, and more violence in the Middle East, provided some support for the market.

futures were down $1.10, or 1.46%, at $74.07 a barrel at 1200 GMT. U.S. West Texas Intermediate crude was down $1.14, or 1.59%, at $70.42 per barrel.

Despite a slew of monetary support measures announced by China’s central bank on Tuesday, the boldest since the pandemic, analysts warned that more fiscal help was needed to boost activity in the world’s second-largest economy.

“Concerns lingered that more fiscal support would be needed to boost confidence in the Chinese economy. This uncertainty raised doubts about sustained demand growth, weighing on crude prices,” said George Khoury, global head of education and research at CFI Financial Group.

Oil prices rose by about 1.7% on Tuesday after China announced sweeping interest rate cuts and more funding. But credit demand is already extremely weak, and the steps did not include any measures to shore up real economic activity.

“Market participants (are) questioning if the latest stimulus measures by the People’s Bank of China are enough to support Chinese economic and oil demand growth,” said UBS analyst Giovanni Staunovo.

“I still see further upside for crude prices, with oil inventories still falling globally,” he added.

U.S. oil stockpiles fell by 4.34 million barrels last week while gasoline inventories dropped by 3.44 million barrels and distillate stocks were down by 1.12 million barrels, according to market sources citing American Petroleum Institute figures on Tuesday.

The intensifying conflict between Iran-backed Hezbollah in Lebanon and Israel also supported crude prices, with cross-border rockets launched by both sides increasing fears of a wider conflict.

Although Iran’s leadership has shown restraint, an attack is probably on the cards in order to save face, but without enraging its European allies and disrupting the main oil trade routes, said Achilleas Georgolopoulos, investment analyst at brokerage XM.

Meanwhile, a hurricane threatening the U.S. Gulf Coast has changed course towards Florida and away from oil and gas-producing areas near Texas, Louisiana and Mississippi.

Investing.com — Analysts at UBS in a note dated Tuesday emphasized that the current market dynamics require higher prices in 2025 to sustain stronger export demand. 

Despite recent price increases following a dip in August, UBS believes that natural gas prices must rise further to balance market conditions, especially considering export growth and market rebalancing efforts.

US natural gas prices began climbing at the end of August, following a period of low prices that incentivized producers to cut output. 

This reduction, coupled with increased demand in the power sector—where natural gas has been favored over more expensive coal—has contributed to a slowdown in weekly natural gas injections. Consequently, the market has started to rebalance.

However, natural gas inventories remain above the five-year average. The surplus, which was over 500 billion cubic feet before July, has since decreased to less than 300 billion cubic feet, signaling gradual rebalancing in supply and demand.

Despite this progress, UBS has revised its natural gas price forecasts downward. Delays in the start of new US liquefied natural gas export terminals, combined with potential disruptions from weather events like hurricanes, have led the team to reduce their forecast by USD 0.20/mmbtu across all time frames. 

“We now expect the Golden Pass export terminal to start around end-2025,” the analysts said.

Nevertheless, UBS maintains that prices need to rise in 2025 to support the expected increase in export demand. While new export capacity is on the horizon, these delays have pushed out the expected timeline for a price recovery.

UBS however flag several risks that could further influence price trajectories. A key uncertainty is the weather, particularly the severity of the upcoming winter. A very mild winter could dampen demand, further delaying price increases. 

Conversely, a colder-than-expected winter could put upward pressure on prices due to higher heating demand.

High roll costs, which have already weighed on market performance, also remain a challenge for investors. Given these uncertainties, UBS currently advises investors to stay on the sidelines and avoid making recommendations in the short term.