Oil prices fell on Thursday after three sessions of gains after Federal Reserve Chairman Jerome Powell highlighted banking sector credit risks for the world’s largest economy and US crude inventories rose more than expected.
Brent crude futures fell 66 cents, or 0.9%, at 0420 GMT to $76.03 a barrel, while West Texas Intermediate crude (WTI) dropped 74 cents, or 1.0%, to $70.16.
Both crude oil gauges settled at their highest close since March 14 on Wednesday after the dollar slumped to a six-week low.
While economic risks were pointed out at the Fed meeting, the higher-than-expected US crude oil inventories dampened some optimism about the demand outlook.
However, the weakness in the dollar is in a bright spot to help build some resistance in oil prices, and there is some space for upward movement in oil prices amid the dips seen earlier this week.
While raising interest rates by a quarter point, the Fed stated that it is on the verge of halting further increases in borrowing costs due to the recent turmoil in financial markets with the bankruptcy of two US banks.
Powell said on Wednesday that banking sector stress could trigger a credit crunch, with “significant” consequences for an economy that U.S. central bank officials predict will slow more this year than previously thought.
Meanwhile, US crude inventories unexpectedly rose to a nearly two-year high last week, according to the latest data from the Energy Information Administration (EIA).
Crude oil inventories rose 1.1 million barrels in the week of March 17 to 481.2 million barrels, reaching the highest level since May 2021. However, analysts were expecting a 1.6 million barrel decrease.
Despite all the concerns about the US oil production growth outlook for 2023, cost inflation, and investment spending, the latest EIA weekly report confirms that US oil has an important role to play in global oil markets.
Citing EIA data, analysts also say gross exports of crude oil and petroleum products have reached a new high of 12 million barrels per day, well above the supply levels of all other countries.