Crude tumbles on strong US stockpiles and rates fears

London — Oil prices dropped for a second day on Wednesday after an industry report pointed to ample supplies in the US and expected further interest rate hikes led to concerns about weaker fuel demand and the economic outlook.

US crude stocks rose by a more-than-forecast 10.5-million barrels, according to market sources citing American Petroleum Institute (API) figures. The official Energy Information Administration data is due 3.30pm GMT.

“Simply put, the US is swimming in oil,” said Stephen Brennock of oil broker PVM.

Brent crude futures slid $1.13, or 1.3%, to $84.45 a barrel by 9.10am GMT, while US West Texas Intermediate dropped $1.31, or 1.7% to $77.75.

US inflation data and remarks from central bank officials indicating that interest rates are going to be higher for longer also weighed on the market.

Federal Reserve officials said on Tuesday the US central bank will need to keep gradually raising interest rates to beat inflation and suggested price pressures driven by a hot jobs market may push borrowing costs higher than they once thought.

Also putting downward pressure on crude was the US announcement this week that it would sell 26-million barrels of oil from the nation’s strategic reserve, which is already at its lowest level in about four decades.

Lending some support was Tuesday’s Opec report, in which the cartel made its first upward revision to global oil demand growth in months and trimmed the non-Opec supply outlook, pointing to a tighter market in 2023.

The International Energy Agency, in its report on Wednesday, also boosted its 2023 demand forecast.

Reuters