Oil fell on Wednesday as the market weighed potential rate hikes by the Federal Reserve, which could slow growth and reduce oil consumption by offsetting falling US oil stocks and strong Chinese economic data.
Brent crude futures fell 7 cents to $84.70 a barrel at 0320 GMT. West Texas Intermediate crude (WTI) fell 5 cents to $80.81 a barrel.
Fed officials say the US Federal Reserve is more ready for a possible rate hike to combat inflation. Markets are pricing in an 86% probability that the Fed will raise rates by 25 basis points at its May meeting.
U.S. crude inventories dropped by about 2.68 million barrels in the week ended April 14, adding to prices, according to market sources citing Tuesday’s figures from the American Petroleum Institute (API). Gasoline and distillate stocks also fell last week, sources said.
The official inventory report of the Energy Information Administration (EIA), the statistical arm of the US Department of Energy, will be released Wednesday at 1430 GMT.
Meanwhile, the economy of China, the largest importer of crude oil, grew 4.5% faster than expected in the first quarter, while the country’s oil refinery output rose to record levels in March, according to data.
According to analysts, the market is impatient about the impact of China’s reopening on demand.
Declining refinery margins for diesel and jet fuel indicate softening in global demand. But this is offset by weakness on the other side. Distillates and gasoline cracks from Asia to Europe are weak due to sluggish demand and increased product supply in the market.
Another factor adding to the pressure on oil benchmarks is that Asian refineries continued to focus heavily on Russian crude oil in April. So far in April, India and China have bought the vast majority of Russian oil at prices above the West’s ceiling of $60 a barrel, according to traders.
