Oil prices fell on Wednesday, ending their three-day rally as an unexpected rise in US oil inventories raised demand concerns and investors waited for US inflation data to decide the next rate adjustment for the top oil-consuming country.
Brent crude dropped 69 cents, or 0.9%, at 0643 GMT to $76.75 a barrel, while West Texas Intermediate (WTI) crude fell 67 cents, or 0.9%, to $73.04.
In a possible sign of weakening demand, US crude inventories increased by nearly 3.6 million barrels in the week ended May 5, while gasoline inventories increased by 399,000 barrels, the American Petroleum Institute (API) reported on Tuesday.
The data challenged analysts’ expectations for a 900,000-barrel drop in crude oil inventories and a 1.2 million-barrel drop in gasoline inventories. EIA data on the US government’s oil inventories will be released today.
Surprising U.S. stockpiles in April, coupled with lower crude oil imports in China and soft export growth, raised concerns about global oil demand. Oil investors should heed for clues to the economic health of the bleak US economy.
The market is focused on the US consumer price index (CPI) figures for April, which will be released on Wednesday.
New York Fed President John Williams said that despite the US central bank’s signals of abandoning leadership over the need for future rate hikes, inflation was too high and the central bank would raise rates again if needed.
The market is also waiting for the Organization of the Petroleum Exporting Countries (OPEC) monthly oil report to be released on Thursday for clues as to whether the group and its allies will cut production again to support prices.
The allies, known as OPEC+, agreed last month to cut production by 1.16 million barrels per day from May to the end of the year.
According to media reports, the Russian Ministry of Energy said that the decline in the country’s oil production almost reached the targeted levels in April.
Promising to reduce production by 500,000 barrels per day from May, Saudi Arabia said it will supply buyers in Asia with the full volume of crude oil requested for June. Some refineries in China, the world’s largest oil exporter, may have lowered their production targets, demanding less supply.
In Alberta, Canada’s main oil-producing province, wildfires eased on Tuesday thanks to cool weather. Forest fires forced oil and gas producers to shut down at least 319,000 barrels of oil equivalent per day, or 3.7% of the country’s production.
Markets are also watching comments from US President Joe Biden and leading Republican lawmakers about raising the $31.4 trillion US debt ceiling, fearing an unprecedented default if Congress doesn’t act in three weeks.