Oil prices fell about 3 percent on Wednesday as investors worried that a Fed rate hike could push the U.S. economy into a recession and dampen fuel demand.
Brent crude futures fell $2.91, or 2.5%, to $111.74 a barrel. The global benchmark hit an intraday low of $107.03, its lowest since May 19.
U.S. West Texas Intermediate (WTI) crude fell $3.33, or 3 percent, to $106.19 a barrel. The session low was $101.53, the lowest since May 11.
Investors on Wednesday assessed how raising interest rates to ease rising inflation could hamper the economic recovery.
However, oil prices pared losses in the session after Federal Reserve Chairman Jerome Powell pledged his “priority focus” on reducing inflation and reiterated that it would be appropriate for the central bank to continue raising interest rates, the pace of which depends on the economic outlook.
Meanwhile, U.S. President Joe Biden asked Congress to pass a three-month moratorium on state gasoline taxes to help combat record gasoline prices and provide temporary relief to American families this summer.
Can Biden Administration Do More?
While lower oil prices may boost fuel demand and support crude prices, PVM analyst Stephen Brennock said traders might be concerned that a Biden administration could do more to drive down high energy prices.
Lawmakers from both parties have expressed opposition to the suspension of the federal gasoline tax.
Government data showed that U.S. refining capacity fell for the second straight year in 2021 as plant shutdowns continued to affect its ability to produce gasoline and diesel.
U.S. crude oil inventories rose by about 5.6 million barrels last week. In comparison, gasoline inventories rose by 1.2 million barrels, while distillate inventories fell by about 1.7 million barrels, market sources said, citing data from the American Petroleum Institute on Wednesday.