Oil prices declined slightly on Wednesday, extending significant losses from the previous session. This was driven by lingering doubts over global demand, particularly as data indicated an unexpected build in U.S. inventories.
Profit-taking weighs on crude futures
Some mild profit-taking also weighed on crude futures after strong gains in recent sessions, which had been spurred by concerns over supply disruptions stemming from geopolitical tensions in Russia and the Middle East.
Brent and WTI futures dip slightly
Brent oil futures expiring in August fell 0.1 percent to $84.90 per barrel, while West Texas Intermediate crude futures dipped 0.1 percent to $80.78 per barrel by 20:32 ET (00:32 GMT). Despite the dip, both contracts remained elevated compared to the past two weeks, as persistent geopolitical risks – such as Israeli strikes on Gaza and Ukrainian attacks on Russian refineries – kept traders pricing in a risk premium.
Unexpected build in U.S. oil inventories
Data from the American Petroleum Institute (API) on Tuesday showed that U.S. oil inventories grew by around 0.9 million barrels (mb) in the week to June 21, confounding expectations for a 3 mb drawdown. This followed a 2.3 mb build the prior week and fueled concerns that U.S. fuel demand remained sluggish despite the summer driving season.
Awaiting official inventory data
The API data typically foreshadows a similar reading from the official government inventory figures, which are due for release later on Wednesday.
Interest rate and dollar strength limit crude upside
While oil prices have recorded strong gains in the past two weeks, their overall upside was constrained by concerns over high U.S. interest rates, which have boosted the appeal of the dollar. The greenback hovered near two-month highs as recent signs of resilience in the U.S. economy raised expectations that the Federal Reserve will keep rates elevated for longer.
Read more: Oil prices edge higher on hopes of summer demand surge, potential supply disruptions
Focus on key inflation data
The focus this week is largely on the key PCE price index data, which is the Fed’s preferred inflation gauge and could influence the central bank’s outlook on interest rates. A string of hawkish remarks from Fed officials this week has also weighed on oil, as the prospect of prolonged high interest rates fuels fears of cooling economic activity in the coming months.
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