Crude prices experienced a nearly 2% decline on Wednesday, erasing most of the gains made in the previous session, as new data revealed a substantial increase in crude stockpiles, surpassing expectations by a factor of seven.
The cautious stance of the Federal Reserve, signaling a possible resumption of interest rate hikes in July after a temporary pause following ten consecutive increases, further dampened market sentiment and discouraged risk-taking. The concerns over rate hikes and the potential for a recession have contributed to a 15% drop in crude prices this year.
According to Ed Moya, an analyst at online trading platform OANDA, “Crude prices declined after both a mostly bearish EIA report was followed by a hawkish Fed skip that included a clear message that they have a long way to go until they get to the 2% inflation target. The Fed is going to have to take drastic measures to control inflation, and that will likely keep crude prices under pressure.”
WTI crude, traded in New York, settled down $1.15, or 1.7%, at $68.27 per barrel. Despite a 3% rally on Tuesday, the U.S. crude benchmark is down approximately 2% for the week. Over the previous two weeks, WTI experienced a 3.5% decrease.
Brent crude, traded in London, settled down $1.09, or 1.5%, at $73.20. The global crude benchmark declined by around 1.5% for the week, extending the 3% slump witnessed in the previous two weeks.
The recent decline in crude prices followed the release of data indicating that U.S. crude inventories surged by almost 8 million barrels last week, significantly surpassing forecasts. Additionally, fuel stocks exceeded expectations, raising concerns about energy demand during the peak summer travel season.
The Energy Information Administration (EIA) reported that the U.S. crude inventory balance rose by 7.919 million barrels during the week ending June 9. This figure greatly exceeded the forecasted build of 1.482 million barrels made by industry analysts tracked by Investing.com. In the preceding week, crude stockpiles had decreased by 0.451 million barrels.
However, it is important to note that the reported crude build by the EIA includes the release of 1.9 million barrels from the U.S. Strategic Petroleum Reserve. Without this release, the inventory rise would have been approximately 6 million barrels.
Regarding gasoline inventories, the EIA reported a build of 2.108 million barrels, whereas analysts had expected a build of 0.637 million barrels following the previous increase of 2.746 million barrels. Gasoline is the primary fuel product in the United States.
In terms of distillate stockpiles, the EIA reported a build of 2.123 million barrels, surpassing the analysts’ forecast of a 0.922 million barrel increase. In the prior week, distillate stockpiles had increased by 5.075 million barrels. Distillates are refined into heating oil, diesel fuel for various transportation means, and jet fuel.
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