Oil prices recorded a decline in Wednesday’s Asian trading session. As of 01:27 GMT, Brent crude futures hit $82.36 per barrel, representing a 0.5 percent dip. Similarly, U.S. West Texas Intermediate (WTI) crude dropped 0.5 percent to hit $77.20 per barrel. Both figures remain within the reach of a two-week high.
Increase in crude inventories
This downturn follows a report by a U.S. industry group stating an unexpected rise in crude inventories last week. According to the American Petroleum Institute (API), oil inventories rose 8.52 million barrels, substantially higher than the 2.6 million barrel increase expected by analysts polled by Reuters.
Nonetheless, ING analysts noted that “the builds in crude oil were fairly bearish.” They further emphasized how significant product declines offset those. For instance, API data showed that gasoline inventories fell by 7.23 million barrels. Moreover, distillate stocks slipped by 4.02 million barrels. These are also larger-than-expected decreases.
Additionally, the analysts suggested that the data might reflect the impact of the outage at BP’s Whiting refinery, which processes 435,000 barrels per day.
Official figures will be released by the U.S. Energy Information Administration on Wednesday at 15:30 GMT.
Read: WGS 2024: UAE committed to ensuring global oil market stability with OPEC+
New CPI data
Apart from oil product inventories, the newest U.S. Consumer Price Index (CPI) inflation report is also affecting the movement of oil prices. In January, the consumer inflation saw a 3.1 percent year-on-year increase. While this is slightly lower than December’s 3.4 percent, it is still higher than the analysts’ expectation of 2.9 percent.
With new data available, investors now predict that the Federal Reserve (Fed) will cut interest rates in June. This could slow economic growth and reduce oil demand.
Peter Cardillo, chief market economist at Spartan Capital Securities, also warned that if inflation remains high for longer, the rate cuts will be delayed further.
“If this keeps up with another month or two of inflation staying high, you can kiss a June [rate cut] goodbye, and we’re probably looking at September. It’s a hotter-than-expected report, and it’s part of what the Fed has been alluding to when it says it’s too early to say that inflation has been beaten,” he explained.
The delay in anticipated rate cuts has already contributed to the U.S. dollar reaching a three-month high. A stronger dollar generally dampens the demand for oil.
For more markets news, click here.
