Oil prices fell on Wednesday after industry data showed a surprise build in U.S. crude inventories against analysts’ forecast of a decline, reinforcing fears about weakening demand even as supply tightens.
Brent crude futures dropped 18 cents, or 0.2%, to US$80.50 per barrel at 0727 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell 34 cents, or 0.2%, to US$75.05.
Market players are also taking profits as risks persist ahead of a US Federal Open Market Committee meeting, said Tina Teng, a CMC Markets analyst.
“But I still expect that oil prices may continue their recent rebounding pace,” she said, adding that previous selloffs, fuelled by fears of recession, had paused after two consecutive data releases indicated cooler U.S. inflation.
U.S. Federal Reserve policymakers are expected to raise interest rates by 50 basis points on Wednesday, slowing from the 75-basis-point pace they had stuck to in meetings since June as they grapple with inflation.
The U.S. consumer price index rose 0.1% in November after advancing 0.4% the previous month.
“Any commentary from the Fed indicating further deceleration of rate hikes in the U.S. would be supportive to oil prices from here,” said Baden Moore, head of commodities research at National Australia Bank.
U.S. crude inventories rose by about 7.8 million barrels in the week to 9 December, according to market sources citing data from the American Petroleum Institute, while analysts polled by Reuters had expected a 3.6 million barrel drop in stocks.
The inventory data dampened bullish sentiment that sent the market up 3% in the previous session, on hopes for a revival in Chinese demand with the easing of COVID-19 restrictions and for a weakening dollar after data showed U.S. inflation subsiding.
Road and air traffic in China has rebounded sharply, according to data from the transport ministry, travel analytics firms and energy consultancies, boosting the outlook for fuel demand.
OPEC said in its latest monthly report that it is expecting to see robust global oil demand growth in 2023, with potential economic upside coming from a relaxation of China’s COVID-related policies.
Oil prices have also been supported this week by the outage of TC Eenrgy Corp’s Keystone Pipeline, which ships 620,000 barrels per day of Canadian crude to the United States.
The pipeline had shut following a 14,000-barrel spill, with local officials saying on Tuesday that the cleanup will take at least several weeks more.
