Oil declined after an industry estimate pointed to a substantial build in American inventories and investors assessed the outlook for US monetary policy following data showing still-elevated inflation.
(Bloomberg) — Oil declined after an industry estimate pointed to a substantial build in American inventories and investors assessed the outlook for US monetary policy following data showing still-elevated inflation.
West Texas Intermediate fell toward $78 a barrel after ending 1.4% lower on Tuesday. The industry-funded American Petroleum Institute reported that US commercial crude inventories rose by 10.5 million barrels last week, according to people familiar with the figures. That compares with a 2-million-barrel rise forecast in a Bloomberg survey. Official data come later Wednesday.
Investors are trying to work out how much higher the US Federal Reserve will push interest rates to quell the pace of price gains. Consumer prices rose 0.5% in January, the most in three months, and the annual inflation rate came in at a higher-than-expected 6.4%, according to official figures on Tuesday.
Oil has struggled this week despite Russia’s plan to reduce supplies as sanctions bite amid the war in Ukraine, and a host of signs that China’s refiners are scooping up cargoes as activity picks up. A US plan for a mandated sale of barrels from the Strategic Petroleum Reserve has weighed on prices, which have also been burdened by expectations for higher US interest rates and a stronger dollar, which reduces the appeal of risk assets such as oil.
“The direction of travel in the near term looks more south than north,” said Vishnu Varathan, head of Asia economics and strategy at Mizuho Bank Ltd., citing factors including more elevated interest-rate expectations. In addition, given the inventory build, there could be a softening bias, he said.
US crude stockpiles have swelled this year to hit the highest level since mid-2021 after expanding for seven straight weeks. Stockpiles of gasoline and distillates also rose last week, according to the API estimates.
The Paris-based International Energy Agency, which advises rich nations on policy, is due to issue its monthly market snapshot later Wednesday, offering traders fresh insights into supply-and-demand trends over 2023. On Tuesday, the Organization of Petroleum Exporting Countries said that it expected a slightly tighter global oil market than it had previously forecast.
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