Petroleum prices dropped for a second day on Wednesday on signs of ample U.S. supplies and expectations of further interest rate hikes, though forecasts of higher 2023 demand growth and a potentially tighter market limited losses.
U.S. crude stocks rose by a more than forecast 10.5 million barrels, according to market sources citing American Petroleum Institute (API) figures ahead of official Energy Information Administration (EIA) data
Brent crude futures last fell 65 cents, or 0.76%, to $84.93 U.S. a barrel after dropping by more than $1 in earlier trading. U.S. West Texas Intermediate (WTI) crude slipped 63 cents, or 0.63%, to $78.43.
U.S. inflation data and remarks from central bank officials that have been perceived as indications that interest rates will go higher for a longer period also weighed on the market.
Federal Reserve officials on Tuesday said that the U.S. central bank will need to maintain gradual increases to interest rates to beat inflation and suggested that price pressures driven by a hot jobs market could push borrowing costs higher than previously expected.
Also applying downward pressure on crude was the announcement this week that the United States would sell 26 million barrels of oil from the nation’s strategic reserve, which is already at its lowest level in about four decades.
Lending some support was Wednesday’s report from the International Energy Agency (IEA), which raised its forecast for 2023 oil demand growth and said that restrained production by the Organization of the Petroleum Exporting Countries and their allies (known as OPEC+) could bring a supply deficit in the second half.
The IEA said that about one million barrels per day (bpd) of production from OPEC+ member Russia will be shut in by the end of the first quarter, citing a European ban on seaborne imports and a G7 price cap over the invasion of Ukraine.