BENGALURU: Oil prices fell more than a dollar a barrel on Wednesday, ending a three-day rally as an unexpected jump in US oil inventories sparked demand concerns.
Brent crude dropped $1.38, or 1.8%, to $76.06 a barrel by 10:47 a.m. EDT (1447 GMT) while US West Texas Intermediate (WTI) crude fell $1.48, or 2%, to $72.23.
In a possible sign of weakening demand, US crude inventories rose by about 3 million barrels in the week ended May 5, the Energy Information Administration said.
Analysts polled by Reuters expected a drawdown of 900,000 barrels of crude.
The surprising US inventory build along with lower crude imports and April’s softer export growth in China exacerbated worries about global oil demand.
US consumer prices rose in April, potentially raising the likelihood that the Federal Reserve will maintain higher interest rates for the time being. Rising global interest rates have stirred fears of an impending recession, putting more pressure on oil prices.
However, a large draw in US gasoline and distillate inventories provided some support for oil prices on Wednesday.
The market is also awaiting the monthly oil report from the Organization of the Petroleum Exporting Countries (OPEC) on Thursday for clues on whether the group and its allies will need to cut output again to prop up prices.
OPEC and its allies, together known as OPEC+, agreed last month to cut production by 1.16 million barrels per day (bpd) from May through to the end of the year and is due to hold another policy meeting on June 4.
“Traders are not of the view that OPEC+ output cuts fully offset the difficulties that lie ahead for the global economy,” said Craig Erlam, senior market analyst at OANDA.
“Further action by (OPEC+) or calmer conditions in US banks could see oil prices bounce back once more.” Meanwhile, markets were monitoring US President Joe Biden and top Republican lawmakers’ comments on raising the $31.4 trillion US debt ceiling, fearing an unprecedented default if Congress does not act in the next three weeks.
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