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Investing.com– Oil prices fell Wednesday, coming under pressure from signs of a massive weekly build in U.S. inventories and on concerns U.S. interest rates will stay elevated for a prolonged period, stifling economic activity.
By 08:30 ET (13.30 GMT), the U.S. crude futures traded 0.1% lower at $78.78 a barrel and the Brent contract dropped 0.2% to $82.48 a barrel.
API data shows large crude build
Data from the American Petroleum Institute (API) showed U.S. crude oil inventories grew by 8.4 million barrels in the week to Feb. 22, much more than analyst expectations for a build of 1.8 million barrels.
The reading indicates that U.S. markets remain well-supplied amid record-high production and relatively sluggish fuel consumption.
While the API data usually heralds a similar reading from official inventory data, which is due later in the day, it has somewhat diverged from government data in recent weeks.
GDP data shows slowing U.S. growth
Crude was also pressured by strength in the dollar, as markets positioned for key PCE price index data this week to gauge the path of U.S. inflation and interest rates.
Several Fed officials have cautioned against expecting interest rates to fall too quickly as inflation remains an issue. This theme was carried on by Federal Reserve Governor Michelle Bowman on Tuesday, when she signaled she is in no rush to cut U.S. interest rates.
“My baseline outlook continues to be that inflation will decline further with the policy rate held steady,” Bowman said in a gathering in Florida. “I will remain cautious in my approach to considering future changes in the stance of policy.”
However, data released earlier Wednesday showed that annualised U.S. GDP growth fell to 3.2% in the fourth quarter, down from 4.9% the prior quarter, suggesting economic activity is slowing in the world’s largest economy and biggest consumer of crude.
Continuation of OPEC+ cuts had prompted gains
Prices were sitting on strong gains from the prior session after media reports suggested that the Organization of Petroleum Exporting Countries and allies (OPEC+) could maintain its current pace of supply cuts into the second quarter, keeping global supplies limited.
Analysts at ANZ wrote in a morning note that strong U.S. refinery demand, high demand for U.S. oil exports and a widening spread between spot oil and one-month futures pointed to tighter physical markets in the coming months- a trend that is positive for oil prices.
They noted that Chinese spot buyers had also increased amid higher demand during the Lunar New Year Holiday, while any potential extension of supply cuts by the OPEC+ heralded even tighter markets later this year.
Biden says Israel agrees to Ramadan ceasefire
Elsewhere. media reports pointing to U.S. President Joe Biden indicating that Israel has agreed to an over month-long halt in fighting in Gaza, for the Muslim holy month of Ramadan.
Israeli and Hamas officials downplayed Biden’s comments. But Hamas officials were also seen studying a new ceasefire proposal put forward by the U.S., Qatar, and Egypt in Paris.
The Israel-Hamas war has provided a floor to oil prices in recent months, especially amid fears that an extended conflict in the Middle East will disrupt global oil supplies.
Continued attacks by the Yemeni Houthis on vessels in the Red Sea have also disrupted global shipping routes and delayed some oil deliveries in Europe and Asia.
(Ambar Warrick contributed to this article.)
Source: Investing.com
