NEW YORK: Oil prices slid $3 a barrel on Wednesday after US government data showed big builds in crude oil, gasoline and distillate inventories and OPEC and its allies stuck to their output policy.
Brent crude futures were down $2.6, or 3.5%, at $82.50 a barrel by 12:50 p.m. ET (1750 GMT). West Texas Intermediate (WTI) US crude futures fell $2.67, or 3.4% to $76.20.
US crude oil and fuel inventories rose last week to their highest levels since June 2021, the Energy Information Administration said, as demand remained weak.
Crude inventories climbed 4.1 million barrels in the week ended Jan. 27 to 452.7 million barrels, much steeper than the 0.4 million barrel rise that analysts had forecast in a Reuters poll. It was the sixth straight weekly build, as refining utilization declined and net imports climbed.
“The market is reacting to the report that indicates there isn’t demand for crude oil or fuels,” said John Kilduff, partner at Again Capital LLC in New York.
Market participants are also watching the US Federal Reserve, which is expected to deliver its interest rate decision at 2 p.m. ET (1900 GMT).
The Fed is expected to raise its target interest rate by a quarter of a percentage point in the afternoon, easing off the rapid hikes used last year to fight surging inflation. Oil could come under pressure if the dollar strengthens after the announcement, making greenback-denominated oil more expensive for other currency holders.
“Faced with the prospect of a rising dollar and this EIA data, investors are dumping positions they probably wish they never held,” said Bob Yawger, director of energy futures at Mizuho.
Ministers from the OPEC+ producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia kept their output policy unchanged on Wednesday.
OPEC’s oil output fell in January, as Iraqi exports dropped and Nigerian output did not recover, with the 10 OPEC members pumping 920,000 barrels per day (bpd) below OPEC+ targeted volumes, a Reuters survey found.
The shortfall was bigger than the 780,000 bpd deficit in December.
Elsewhere, Russia’s Deputy Prime Minister said he expected oil demand to rise on the back of Chinese economic activity.
Tamer US rate hike expectations helped to lower the dollar index, which supported oil prices, said PVM analyst Stephen Brennock. A weaker US currency makes dollar-priced oil cheaper for buyers holding other currencies.
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