Oil prices fell on Wednesday as fears that more aggressive U.S. interest rate hikes would pressure economic growth and oil demand outweighed a larger-than-expected draw in U.S. crude stocks.
Brent crude futures were down $74 cents, or 0.9 per cent, to $82.55 per barrel by 5:41 p.m. U.S. West Texas Intermediate crude futures slipped 99 cents, or 1.3 per cent, to $76.59 a barrel.
“Oil prices are still seeing downward pressure due to the hawkish comments coming out of the Fed indicating higher interest rates for a longer period of time,” said Andrew Lipow, president of consultants Lipow Oil Associates.
Both Brent and WTI fell by more than 3 per cent on Tuesday after comments by U.S. Federal Reserve Chair Jerome Powell that the central bank would likely need to raise interest rates more than expected in response to recent strong data.
A stronger dollar also capped oil prices earlier in the session. Powell’s comments had propelled the U.S. dollar, which typically trades inversely with oil, to hit a three-month high against a basket of currencies.
U.S. private payrolls increased more than expected in February, pointing to continued labour market strength.
Crude stocks drew 1.7 million barrels, compared with estimates for a build of 395,000. American Petroleum Institute data on Tuesday showed a decline in crude inventories for the first time after a 10-week build.
U.S. gasoline stocks drew by 1.1 million barrels, according to a report from the U.S. Energy Information Administration, lower than the 1.8 million estimated in a Reuters poll, adding to demand concerns. Distillate inventory grew by 138,000 barrels, compared with expectations for a 1 million barrel draw.
Barclays lowered its 2023 Brent forecast by $6 to $92 a barrel and for WTI by $7 to $87, “due primarily to more resilient-than-expected Russian supplies,” the bank said.
“[We] expect the continued recovery in civil aviation demand in China and neighbouring countries, a stabilization in industrial activity and slower non-OPEC+ supply growth to drive the oil market balance into a deficit later this year,” the bank added.
Oil ministers and executives continued to debate supply tightness at a conference in Houston, with Angola’s secretary of state for oil and gas saying there was no need for the Organization of the Petroleum Exporting Countries to increase oil output to make up for Russia’s 500,000 barrel per day cut.
