Oil Drops on U.S. Inventory Jump, Rate Hike Worries
Oil dropped for a second day on Wednesday, as an industry report pointed to ample supplies in the United States and anticipation of further interest rate hikes sparked concerns over weaker fuel demand and the economic outlook.
Market sources, citing data from the American Petroleum Institute (API), say that U.S. crude stocks rose by more than expected, by 10.5 million barrels. This is before official data from the Energy Information Administration (EIA), which will be released at 15:30 GMT.
"Simply put, the U.S. is swimming in oil," said Stephen Brennock of oil broker PVM.
Brent crude futures slid $1.13, or 1.3%, to $84.45 a barrel by 0910 GMT, while U.S. West Texas Intermediate (WTI) crude dropped $1.31, or 1.7% to $77.75.
U.S. inflation data and remarks from central bank officials that have spurred investor worries that interest rates are going to be higher for longer also weighed on the market.
Officials from the Federal Reserve said on Tuesday that the US central bank will need to keep gradually raising interest rates to beat inflation, and that price pressures caused by a strong labour market may push borrowing costs higher than previously thought.
Also putting downward pressure on crude was the U.S. announcement this week that it would sell 26 million barrels of oil from the nation's strategic reserve, which is already at its lowest level in roughly four decades.
Lending some support was Tuesday's Organisation of the Petroleum Exporting Countries report, in which the group made its first upward revision to global oil demand growth in months and trimmed the non-OPEC supply outlook, pointing to a tighter market in 2023.
The International Energy Agency, in its report on Wednesday, also boosted its 2023 demand forecast.