Oil slumped in Asian trade Wednesday morning, trailing two-day gains after an industry report showed U.S. crude stockpiles unexpectedly surged last week in a sign that fuel demand could weaken.
Brent futures, which are up more than 3% this week, were down 37 cents, or 0.5%, at $74.95 a barrel at 0400 GMT. West Texas Intermediate (WTI) crude futures were down 39 cents, or 0.6%, at $69.28.
U.S. crude inventories increased by nearly 3.3 million barrels in the week ended March 17, according to data released by the American Petroleum Institute (API) on Tuesday. This belied some analysts’ expectations for a decline of around 1.6 million barrels.
Traders and analysts will await data from the US Energy Information Administration (EIA) on Wednesday to see the status of crude oil demand.
At the same time, markets await the outcome of Wednesday’s meeting of the US Federal Reserve, seen as the toughest Fed policy decision in recent times.
After the meeting, Chairman Jerome Powell is expected to announce new economic projections and the strategy for the central bank’s interest rates.
While the market expects the Fed to raise interest rates by 25 basis points on Wednesday, some top central bank watchers say the Fed won’t raise rates further or may delay issuing new economic projections due to fluctuations in the global banking sector.
Suspension of interest rate hikes will help revive economic activity and thus increase fuel demand.
Oil prices posted their biggest drop in months last week, following high-profile US bank failures and the European Credit Suisse crisis that began on March 10. However, the emergency rescue of Credit Suisse over the weekend helped fuel oil prices.
OPEC+ officials, hedge fund managers, and oil market participants called the recent drop in oil prices speculative and insisted that rising demand will push prices higher in the coming months.
According to analysts, there are concerns that supply may be more affected by demand during the banking crisis. US shale oil production is most affected by the tighter credit conditions of regional US banks.
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