LONDON: Oil prices fell on Wednesday as concerns about fuel demand were stoked by expectations minutes of the U.S. Federal Reserve’s most recent policy meeting due later in the day would indicate a need for higher interest rates.
Brent crude futures for April delivery were down 79 cents, or 0.95%, to $82.26 a barrel at 1452 GMT. West Texas Intermediate (WTI) crude futures for April dropped by 68 cents, or 0.89%, to $75.68 a barrel.
The minutes from the Federal Reserve’s last policy meeting are expected to give traders a glimpse how much further interest rates may need to rise to slow inflation and cool an economy that has remained stronger than expected despite monetary tightening.
Higher interest rates tend to lift the dollar, making dollar-denominated oil more expensive for holders of other currencies and reducing demand.
Other economic reports from the United States, the world’s biggest oil consumer, showed some troubling signs however. Sales of existing homes fell in January to their lowest since October 2010.
A preliminary Reuters analyst poll on Tuesday also showed a rise in U.S. crude inventories, exacerbating demand worries. Inventory reports from the American Petroleum Institute, an industry group, are due at 4:30 p.m. ET (2130 GMT) on Wednesday.
The economic outlook across Europe, however, continues to show resilience, UBS said in a note. This followed business surveys released on Tuesday which showed surprisingly strong growth.
Expectations of tighter global supplies and rising demand from China also cushioned overall price weakness.
Analysts expect China’s oil imports to hit a record high in 2023 to meet increased demand for transportation fuel and as new refineries come on stream.
In a note on Wednesday, Daniel Hynes, senior commodity strategist at ANZ Bank, pointed to state-owned PetroChina and Unipec booking 10 supertankers to import oil from the United States next month, equal to about 20 million barrels of crude, as signs of rising Chinese demand. China is the world’s largest oil importer.
Morgan Stanley has raised its global oil demand growth estimate for this year by about 36%, citing growing momentum in China’s reopening and a recovery in aviation, but flagged higher supply from Russia as an offseting factor.