In Asian trading on Wednesday, oil prices continued their downward trend as industry data revealed an unexpected increase in U.S. inventories, while ongoing apprehensions regarding elevated U.S. interest rates added to subdued market sentiment.
With fears of sluggish demand looming and easing concerns about geopolitical tensions in the Middle East, oil faced its fourth consecutive session in the red. Additionally, diminishing optimism about an economic rebound in China, the world’s top importer, further dampened sentiment towards oil markets.
Brent oil futures expiring in July experienced a 0.6% decline to $82.40 a barrel, while West Texas Intermediate crude futures fell by 0.7% to $78.13 a barrel by 21:05 ET (01:05 GMT).
The latest data from the American Petroleum Institute (API) reported a surprising growth in U.S. oil inventories by 2.5 million barrels (mb) for the week ending May 17, surpassing expectations for a draw of 3.1 mb. Gasoline stockpiles also expanded by 2.1 mb, while distillate inventories saw a decline of 320,000 barrels.
This unexpected uptick in inventories raised concerns about sluggish U.S. oil demand, particularly in terms of fuel consumption, ahead of the summer season marked by the Memorial Day holiday.
However, fears persisted among traders that the pressure from persistent inflation and high interest rates could limit demand strength in the upcoming months.
Market sentiment was further weighed down by cautious statements from Federal Reserve officials, who signaled the possibility of maintaining high U.S. rates for an extended period. These concerns intensified as the minutes of the Fed’s late-April meeting, expected later on Wednesday, are likely to provide more insights into the central bank’s rate-cutting plans.
Moreover, the strengthening of the dollar ahead of the minutes added additional pressure on oil prices.
Looking ahead, market focus is also directed towards an upcoming meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+), scheduled for early June, for any indications regarding the extension of current production cuts by the cartel.