Oil futures fell on Thursday. The Federal Reserve chief has signaled more rate hikes. Official US inventory data is expected while demand fears persist. API’s report shows an unexpected drop in crude oil inventories.
Brent futures fell 22 cents or 0.3%, at 0646 GMT to $76.90 a barrel, while West Texas Intermediate (WTI) crude futures were down 17 cents, or 0.2%, at $72.36.
Benchmarks had gained a dollar a barrel in the previous session as US corn and soybean prices soared to multi-month highs, raising expectations that crop shortfalls around the world could reduce biofuel production and boost oil demand.
The market is cautious as Fed Chairman Jerome Powell said in a speech to Congress on Wednesday that the central bank’s aim is to rein in inflation and that two more 25bp rate hikes by the end of the year are a “pretty good forecast”.
Higher interest rates ultimately increase borrowing costs for consumers, which slows economic growth and reduces oil demand.
Oil held on to most of the previous session’s gains as the market sought new drivers, including signs of demand optimism in China and the latest US inventory data.
China’s economic recovery is still a concern for oil traders. Further stimulus measures from the Chinese government could improve the oil demand outlook, and data on Chinese factory activity could guide oil price movements next week.
Meanwhile, official inventory data from the U.S. Energy Information Administration will be released on Thursday. The report was postponed to a day later due to Monday’s public holiday.
As a preliminary indicator, data from the American Petroleum Institute (API), an industry group, showed U.S. crude inventories dropped nearly 1.2 million barrels in the week ended June 16, failing analysts’ forecasts for a 300,000-barrel increase.
Moderate increases in US oil production and cuts by the OPEC+ group of producing countries are likely to limit crude oil supply in the coming months and could boost oil prices higher.
