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.
Both oil benchmarks had dropped by more than 3% 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.
Brent crude futures were down 63 cents, or 0.8%, to $82.66 per barrel, while U.S. West Texas Intermediate (WTI) crude futures slipped 92 cents, or 1.2%, to $76.66 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.
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. crude stocks fell 1.7 million barrels last week, government data showed, compared with analyst estimates for a build of 395,000. Industry data late 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 official data, less than the 1.8 million forecast, 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 output to make up for Russia’s 500,000 barrel per day cut.
Meanwhile, a group of bipartisan U.S. senators said they have reintroduced legislation to pressure OPEC to stop making output cuts.
U.S. Energy Secretary Jennifer Granholm also said that any further releases from the U.S. Strategic Petroleum Reserve would be due to disruptions like the war in Ukraine.