HOUSTON: Oil prices were little changed on Wednesday, giving up early gains, as markets weighed an unexpected, large build in U.S. crude oil against bullish demand growth forecasts and optimism over the Federal Reserve likely pausing interest rates.
Brent crude futures were up 15 cents, or 0.1%, at $74.38 a barrel by 11:12 a.m. ET. U.S. West Texas Intermediate (WTI) crude was 5 cents, or 0.1%, higher at $69.51.
Both benchmarks had climbed more than 1.5% earlier in the session. It rose more than 3% the previous day on expectations of rising fuel demand after China’s central bank lowered a short-term lending rate.
U.S. crude oil stocks rose by about 8 million barrels in the week ended June 9, according to data from the Energy Information Administration. Analysts had estimated a 500,000-barrel decline.
Gasoline and diesel stocks also rose more than expected.
Market participants also expect the U.S. central bank’s Federal Open Market Committee (FOMC) to pause interest rate hikes because of uncertainty over the economic outlook and the effects of 10 rate increases since March 2022.
Oil prices fall as investors await Fed rate decision
Higher interest rates strengthen the dollar, making commodities denominated in the U.S. currency more expensive for holders of other currencies. A pause in the Fed’s rate increases would spur economic growth and oil demand, supporting prices.
“Today, oil will take its cue from the Federal Open Market Committee. The market is widely pricing in the fact that the Fed will pause from their historic rate-hiking cycle, which is supportive of the price of oil,” said Price Group analyst Phil Flynn.
The IEA, meanwhile, increased its oil demand growth forecast for this year by 200,000 barrels per day (bpd) to 2.4 million bpd, lifting the projected total to 102.3 million bpd.
However, the agency expects economic headwinds to reduce growth to 860,000 bpd next year and increasing use of electric vehicles to help to reduce that to 400,000 bpd in 2028 for overall demand of 105.7 million bpd.
The IEA’s 2023 oil demand growth figure is slightly above that of the Organization of the Petroleum Exporting Countries (OPEC).
JP Morgan downgraded its forecast for this year’s average Brent crude price by $9 to $81 a barrel.