Close

Oil prices fall further on surprise US inventory build, rate jitters

May 22, 2024 5:11 AM EDT

Investing.com-- Oil prices fell in Asian trade on Wednesday as industry data showed an unexpected build in U.S. inventories, while persistent concerns over high U.S. interest rates also kept sentiment subdued.


Oil was now headed for a fourth straight session in red, as fears of sluggish demand and easing concerns over geopolitical instability in the Middle East also sparked selling. Cooling optimism over an economic recovery in top importer China also dampened sentiment towards oil markets.


Brent oil futures expiring in July sank 0.6% to $82.40 a barrel, while West Texas Intermediate crude futures fell 0.7% to $78.13 a barrel by 21:05 ET (01:05 GMT).


US inventories see unexpected build- API


Data from the American Petroleum Institute showed on Tuesday that U.S. oil inventories grew by 2.5 million barrels (mb) in the week to May 17, beating expectations for a draw of 3.1 mb.


Gasoline stockpiles also grew by 2.1 mb, while distillate inventories fell by 320,000 barrels, the API data showed.


The unexpected build in inventories raised some concerns over sluggish U.S. oil demand, especially with regards to fuel consumption. The API data usually heralds a similar reading from official inventory data, which is due later on Wednesday.


U.S. fuel demand is set to increase in the coming weeks, with the upcoming memorial day holiday set to mark the beginning of the travel-heavy summer season.


But traders were fearful that pressure from sticky inflation and high interest rates would limit strength in demand over the coming months.


Rate fears in play ahead of Fed minutes


A string of cautious statements from Federal Reserve officials this week also weighed on sentiment, as markets feared that high-for-longer U.S. rates will eat into demand this year.


Fed officials warned that the central bank needed much more confidence that inflation was falling, before it could begin cutting interest rates.


The minutes of the Fed’s late-April meeting are due later on Wednesday, and are expected to offer more cues on the central bank’s plans to cut rates.


The dollar firmed ahead of the minutes, also pressuring oil prices.


Beyond the Fed, focus is also on a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+) in early-June, for any signs that the cartel will extend its current run of production cuts.


You May Also Be Interested In





Related Categories

Commodities, Investing

Related Entities

Crude Oil