Oil widened its losses on Wednesday as a much larger-than-expected increase in US crude inventories and prospects for further rate hikes raised concerns about weak fuel demand and the possibility of an economic recession.
Brent crude futures slid 72 cents, or 0.8%, at 0442 GMT to $84.86 per barrel, while West Texas Intermediate (WTI) crude futures shed 68 cents, or 0.9% to $78.38.
US crude inventories increased by nearly 10.5 million barrels in the week ended Feb. 10, according to market sources citing figures from the American Petroleum Institute (API) on Tuesday.
This amount is much larger than the 1.2 million-barrel increase analysts had expected, potentially indicating a decline in fuel demand. According to sources, it is said that while gasoline stocks increased by about 846 thousand barrels, distillate stocks increased by about 1.7 million barrels.
API data is putting increasing pressure on the oil market as this will be the eighth week that inventories have risen. The weak demand in the US market will continue to reduce oil prices in the near term.
Official EIA inventory data will be released today, as every week.
Meanwhile, a Federal Reserve official said on Tuesday that the US central bank should continue to increase interest rates gradually to beat inflation, following data showing that US consumer prices accelerated in January.
Analysts expect the FOMC (Federal Open Market Committee) to extend the tightening into the second quarter and raise rates by 25 bp (basis points) at the May and June FOMC meetings, in addition to the already anticipated March increase.
In addition, the US Department of Energy’s (DOE) announcement this week that it will sell 26 million barrels of oil from the country’s strategic reserve, which is at its lowest level in nearly four decades, also put pressure on crude oil prices.
Meanwhile, prices get some support from the Organization of the Petroleum Exporting Countries (OPEC) raising its 2023 global oil demand growth forecast in its first upward revision for months, on China’s reopening, and trimmed supply forecasts for major non-OPEC producers, indicating a tighter market.
OPEC has raised its oil demand growth forecast for 2023. The group said global oil demand will increase by 2.32 million barrels per day (bpd), or 2.3%, this year, increasing its forecast by 100,000 barrels per day from February.
