On Wednesday, oil prices fell for a second day on signs of heavy U.S. supply and expectations of further interest rate hikes. However, forecasts of higher demand growth in 2023 and a potential tightening of market losses pared losses.
According to the American Petroleum Institute (API), U.S. crude oil inventories increased by more than forecast by 10.5M barrels.
Brent crude futures were down 45 cents, or 0.53%, at $85.134 a barrel, after falling more than $1 in earlier trade. The price of American West Texas Intermediate (WTI) oil fell by 49 cents, or 0.68%, and amounted to $78.58.
U.S. inflation data and remarks from central bank officials, seen as signs that interest rates will remain on hold for longer, also weighed on the market. In addition, worries about the health of the global economy and geopolitical tensions were also on investors’ minds.
Federal Reserve officials said Tuesday that the U.S. central bank would need to gradually raise interest rates to tackle inflation, suggesting that price pressures from a hot jobs market could push up borrowing costs more than previously expected.
Also putting downward pressure on crude oil this week was the announcement that the United States will sell 26M barrels of oil from the nation’s strategic reserve, the lowest level in four decades.
Oil receives some support
There was some support in a report from the International Energy Agency (IEA) on Wednesday, which raised its forecast for oil demand to increase in 2023 and said tight OPEC+ production could lead to a supply shortfall in the second half.
The IEA said about 1M barrels per day (bpd) of production from OPEC+ member Russia would be shut by the end of the first quarter, following a G7 price cap due to a European ban on seaborne imports and Ukraine’s incursion.
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