Oil stable after unexpected draw in US crude inventories
Singapore — Oil prices steadied on Wednesday as industry data showed an unexpected draw in US crude oil inventories, after the market tumbled in the previous session on fears that more aggressive US rate hikes would hit demand.
Brent crude futures rose 18c, or 0.2%, to $83.47 a barrel by 4.52am GMT, while US West Texas Intermediate (WTI) crude futures gained 4c to $77.62 a barrel.
Data from the American Petroleum Institute (API) showed US crude inventories fell by about 3.8-million barrels in the week ended March 3, according to market sources. The drawdown defied forecasts for a 400,000-barrel rise in crude stocks from nine analysts polled by Reuters.
However, near-term drivers pointed towards a more bearish outlook as investors braced for steeper US rate hikes.
“Fed chair Powell’s comments on ‘higher for longer’ rates spooked markets and sent risk assets, including commodities, sharply down overnight. The short rebound in oil prices today may be due to profit-taking, as nothing has changed fundamentally,” said Tina Teng, an analyst at CMC Markets.
Traders were awaiting crude inventory data from the US Energy Information Administration (EIA) later on Wednesday, after the API data showed a decline in crude inventories for the first time after a 10-week build, she added.
Both Brent and WTI fell more than 3% on Tuesday after comments by US Federal Reserve chair Jerome Powell that the central bank would likely need to raise interest rates more than expected in response to recent strong data.
“This raised concerns of weaker demand in the US,” ANZ Research analysts said in a note to clients.
Powell’s comments propelled the US dollar, which typically trades inversely with oil, to hit a three-month high against a basket of currencies.
The dollar index rose as high as 105.65, up 1.3% on Tuesday and the highest since December 6.