Oil prices fell 1% on Wednesday, ending three days of gains, as industry sources pointed to rising U.S. crude stockpiles and hawkish remarks from Fed Chair Jerome Powell that signalled slower rate cuts this year.
Brent futures were down 67 cents or 0.87% at $76.33 a barrel by 0936 GMT, while U.S. West Texas Intermediate (WTI) crude dropped 75 cents or 1.02% to $72.57 a barrel.
The declines come after three days of gains during which Brent climbed 3.6% and WTI rose 3.7%.
“Oil prices resumed their downtrend as the macro environment weighed on sentiment, with Jerome Powell indicating that the U.S. Fed was not in a rush to lower rates,” said Harry Tchilinguirian, head of research at Onyx Capital Group.
“At the same time, traders are eying this afternoon’s weekly U.S. EIA oil data release, looking to see if the sizeable 9 million barrel build in crude stocks reported by the API yesterday materialises in the official data.”
U.S. Federal Reserve Chair Jerome Powell said on Tuesday the economy is in a good place and the Fed isn’t rushing to cut interest rates further, but is prepared to do it if inflation drops or the job market weakens.
Oil prices climb despite trade war concerns
Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil.
“We saw a substantial price increase in recent days. So probably (there is) some profit-taking following the large crude build reported by API, but that might have been influenced by unfavourable weather impacting crude exports as well as refinery maintenance,” said UBS analyst Giovanni Staunovo.
Crude oil stockpiles in the U.S., the world’s biggest oil producer and consumer, rose by 9.4 million barrels in the week ending February 7, according to sources citing American Petroleum Institute data on Tuesday.
Gasoline inventories fell by 2.51 million barrels, and distillate stocks dropped by 590,000 barrels, the sources said the API data showed.
Data from the Energy Information Administration will be released later on Wednesday.
“This week’s moves on the WTI crude so far seem to be profit-taking activities from bearish short-term speculators as they await today’s U.S. CPI print,” OANDA senior market analyst Kelvin Wong said in an email.
U.S. consumer price index data will be released at 1330 GMT on Wednesday. Expectations are for a slight slowdown in January’s core inflation print to an annual 3.1% and for the headline number to hold steady at 2.9%.
The EIA also increased its estimate for U.S. crude production while leaving its demand forecast unchanged. It now expects U.S. crude oil output to average 13.59 million barrels per day in 2025, up from its prior estimate of 13.55 million bpd.
Comments
Comments are closed for this article.