Oil prices slipped in Asian markets on Wednesday following the significant build in US crude inventories, while traders digested a still-hot inflation situation in the world’s largest economy, further weakening the possibility of a March rate cut by the Federal Reserve.
Brent crude oil futures fell 0.17% to $82.63 per barrel, while the US West Texas Intermediate (WTI) crude futures dropped 0.04% to $77.84 per barrel. The two contracts stayed on course for their highest levels in two weeks.
A higher US dollar contributed to weakness in prices, with the greenback hitting a three-month high as sticky inflation in the country persisted, with the consumer price index (CPI) standing at 3.1% in January.
The reading does not bode well for oil demand in the coming months as it strengthens the case for the Fed to extend higher interest rates, which might keep economic growth momentum in check.
Additional losses in crude were curbed by ongoing geopolitical conflict in the Middle East and Russia, while the US continued to experience tight fuel stocks as refineries in the country remained closed for maintenance.
An Iranian news agency reported on Wednesday that a huge explosion occurred at a main gas pipeline from Shahrekord to Borujen, with the cause of the explosion yet to be determined. No casualties have been reported.
Crude prices were also set for profit-taking after robust surges in the last two weeks, as Israel rejected Hamas’ proposed ceasefire accord and Russia’s fuel export terminals were struck by drone attacks from Ukraine.
On Tuesday, the Organization of Petroleum Exporting Countries (OPEC) monthly report stated that the group maintained its global oil demand outlook. However, it revealed that only a few members stuck to new output cuts, signaling less-than-expected supply tightness in the coming months.
A monthly report from the International Energy Agency will be published on Thursday.
US Posts Oil Inventory Build, Tight Fuel Supplies Remained
US crude stockpiles rose above forecast last week, while product inventories, including gasoline, declined more than anticipated.
Data from the American Petroleum Institute (API) showed on Tuesday that US oil inventories climbed around 8.5 million barrels for the week ending February 9 from the 674,000 barrel increase the week earlier. Economists had expected a build of about 2.6 million barrels.
Refinery closures continued to cap supplies of US gasoline and distillates. Gasoline stockpiles were down 7.2 million barrels, while distillate inventories lost 4.0 million barrels. The data ended more than estimates of a 1.0 million barrel slide and 2.2 million barrel draw, respectively.
The API data often presents an identical trend from the official government inventory report, which is set to be released later in the day and is seen posting a 2.6 million barrel fall in US crude supplies last week.
Still, the significant supply surge might suggest that US output remained robust the previous week. High US production has been a challenge for oil prices as it could ensure sufficient stockpiles in markets despite OPEC’s efforts to rein in world supplies.
