SINGAPORE: After falling in the previous session on worries that more aggressive U.S. interest rate hikes would hurt demand, oil price held steady on Wednesday as industry data revealed an unexpected rise in U.S. crude oil inventories.
Brent crude oil price futures had risen 18 cents, or 0.2 percent, to $83.47 per barrel, while U.S. West Texas Intermediate (WTI) crude futures had risen 4 cents, or 0.7 percent, to $77.62 per barrel, according to Reuters.
According to market sources, crude inventories in the United States decreased by approximately 3.8 million barrels in the week ending March 3 according to data from the American Petroleum Institute. Nine analysts polled by Reuters predicted a rise in crude stocks of 400,000 barrels, but the drawdown was unexpected.
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However, investors were preparing for steeper U.S. rate hikes when near-term drivers pointed to a more bearish outlook.
“Overnight, risk assets, including commodities, saw sharp declines as a result of Fed Chair Powell’s remarks about ‘higher for longer’ rates, which frightened the markets. Tina Teng, an analyst at CMC Markets, stated, “The short rebound in oil prices today may be due to profit-taking because nothing fundamentally changed.”
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After API data showed a decline in crude inventories for the first time after a 10-week build, traders were awaiting crude inventory data from the U.S. Energy Information Administration later on Wednesday, she added.
After U.S. Federal Reserve Chair Jerome Powell said that the central bank would likely need to raise interest rates more than expected in response to recent strong data, Brent and WTI both fell more than 3% on Tuesday.
In a note to customers, analysts from ANZ Research stated, “This raised concerns of weaker demand in the U.S.”
The U.S. dollar, which typically trades in opposition to oil, reached a three-month high against a basket of currencies following Powell’s remarks.
The dollar index reached 105.65 on Tuesday, its highest level since Dec. 6 and an increase of 1.3 percent.
