Oil prices lower

HOUSTON: Oil prices fell more than 1% a barrel on Wednesday, on track to end three days of gains after data showed US crude stockpiles rose by more than expected last week, and hawkish remarks from the Federal Reserve chair.

Brent futures were down 96 cents, or 1.25%, at $76.04 a barrel by 10:42 a.m. EST, while US West Texas Intermediate (WTI) crude dropped $1.05, or 1.43%, to $72.27. Both benchmarks fell by more than $1 during the session. The declines follow three days of gains, during which Brent climbed 3.6% and WTI rose 3.7%. US crude oil stocks posted a larger than expected build last week, the Energy Information Administration (EIA) said on Wednesday. Gasoline inventories meanwhile posted a surprise draw while distillate stocks posted a surprise build.

Investors also eyed the Federal Reserve’s next moves on cutting interest rates following comments on Tuesday by Fed Chair Jerome Powell and after data on Wednesday showed US consumer prices increased more than expected in January. “Oil prices resumed their downtrend as the macro environment weighed on sentiment, with Jerome Powell indicating that the US Fed was not in a rush to lower rates,” said Harry Tchilinguirian, head of research at Onyx Capital Group. US Federal Reserve Chair Jerome Powell said that the economy is in a good place and the Fed is not rushing to cut interest rates further, but it is prepared to do so if inflation drops or the job market weakens.

The consumer price data released by Labor Department’s Bureau of Labor Statistics (BLS) on Wednesday reinforced the Fed’s message. Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil. “We saw a substantial oil 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.

Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report that global oil demand will rise by 1.45 million barrels per day (bpd) in 2025 and by 1.43 million bpd in 2026. Both forecasts were unchanged from last month. The EIA also increased its estimate for US crude production while leaving its demand forecast unchanged. It now expects US crude oil output to average 13.59 million bpd in 2025, up from its previous estimate of 13.55 million bpd.