Oil drops 1% after US data points to further rate hikes
OIL prices fell by more than a dollar a barrel on Wednesday, ending a three-day rally, as economic data suggested that the US Federal Reserve might hike interest rates further.
Brent crude dropped US$1.03, or 1.3 per cent, to settle at US$76.41 a barrel while US West Texas Intermediate crude (WTI) fell US$1.15, or 1.6 per cent, to US$72.56 a barrel.
US consumer prices rose in April, potentially raising the likelihood that the Fed will maintain higher interest rates.
Rising global interest rates have weighed on oil prices in recent months, with traders concerned about recession.
“Oil prices have been depressed by fears about economic growth related to the banking crisis and normal seasonal weakness during the spring as energy demand moderates,” said Jay Hatfield, CEO of Infrastructure Capital Management.
US crude oil inventories rose by about 3 million barrels last week due to another release from national reserves and a drop in exports, the Energy Information Administration said.
The government report confirmed industry data released late Tuesday that had reported an unexpected build, which weighed on prices for most of Wednesday’s session.
Analysts polled by Reuters had forecast a crude drawdown of 900,000 barrels.
The surprising US crude inventory build, along with lower crude imports and April’s softer export growth in China exacerbated worries about global oil demand.
The decline in crude prices was, however, limited by a surge in US petrol demand ahead of the summer driving season.
US petrol inventories fell by 3.2 million barrels last week, much bigger than the 1.2 million-barrel draw forecast by analysts. Distillate stocks also declined, EIA data showed.
RBOB petrol futures rose 0.7 per cent to US$2.50 per gallon, while the ULSD futures contract was unchanged.
“We are forecasting that oil prices range from US$75-95 during 2023 based on fundamental supply and demand and that oil will rally as we head into the summer driving season,” Hatfield said. REUTERS
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