Oil prices fell on Wednesday, ending a three-day rally as U.S. oil inventories unexpectedly rose, causing concern over weakening demand.
Brent crude oil, the international benchmark for Nigerian oil, dropped by 0.8% to $76.80 a barrel while U.S. West Texas Intermediate (WTI) crude oil fell by 0.8% to $73.11.
The American Petroleum Institute reported that U.S. crude inventories rose by about 3.6 million barrels and gasoline stockpiles rose by 399,000 barrels, contrary to expectations for a drawdown of 900,000 barrels of crude and a 1.2 million barrel drop in gasoline stocks.
This unexpected inventory build, combined with lower crude imports and softer export growth in China, has exacerbated worries about global oil demand.
Investors are also waiting for inflation data to get a steer on U.S. interest rates. New York Fed President John Williams has said that inflation remains too high and the central bank will raise rates again if necessary, even though the Federal Reserve dropped guidance about the need for future hikes. The market is now awaiting U.S. consumer price index (CPI) figures for April.
The market is also looking forward to the monthly oil report from the Organization of the Petroleum Exporting Countries (OPEC) on Thursday for clues on whether the group and its allies will need to cut output again to prop up prices. OPEC and its allies agreed last month to cut production by 1.16 million barrels per day (bpd) from May through to the end of the year and are due to hold another policy meeting on June 4.
Overall, traders remain cautious, and some are not convinced that OPEC+ output cuts will fully offset the difficulties that lie ahead for the global economy. The market is also monitoring U.S. President Joe Biden and top Republican lawmakers’ comments on raising the $31.4 trillion U.S. debt ceiling, fearing an unprecedented default if Congress does not act in the next three weeks.