Oil prices experienced a dip on Wednesday, putting a halt to a three-day rally. This was due to an unexpected increase in U.S. oil inventories that sparked concerns about demand. Investors also awaited U.S. inflation data, which would help them gauge the next rate decision in the top oil-consuming nation.
Brent crude decreased by 0.7% to $76.92 a barrel, while U.S. West Texas Intermediate (WTI) crude fell by the same percentage to $73.22.
The American Petroleum Institute reported that U.S. crude inventories rose by approximately 3.6 million barrels in the week ended May 5, and gasoline stockpiles rose by 399,000 barrels.
This data defied expectations from eight analysts polled by Reuters, who projected a 900,000-barrel drawdown in crude inventories and a 1.2 million-barrel drop in gasoline stocks.
The unexpected inventory build-up, coupled with lower crude imports and softer export growth in China in April, exacerbated worries about global oil demand.
Analyst Priyanka Sachdeva from Phillip Nova Pte Ltd stated that “Oil investors should watch out for clues on the economic health of the U.S. economy, which in my opinion looks very dim and bleak as of now.”
Investors are eagerly waiting for the U.S. government’s data on oil inventories due on Wednesday to gain a better understanding of the market. They are also awaiting U.S. consumer price index (CPI) figures for April, which are set to release on Wednesday.
The monthly oil report from the Organization of the Petroleum Exporting Countries (OPEC) is also due on Thursday, and it could provide investors with clues about whether the group and its allies will need to cut output again to prop up prices.
Last month, OPEC and its allies agreed to cut production by 1.16 million barrels per day (bpd) from May until the end of the year. Media reports indicate that Russia’s Energy Ministry said the nation’s oil output reduction almost reached targeted levels in April.
Saudi Arabia, which pledged to cut production by 500,000 bpd from May, has informed buyers in Asia that it will supply full crude oil volumes requested for June. Some Chinese refiners may have asked for less supply, which would help the world’s top oil exporter meet its lower output target.
Wildfires in Alberta, Canada’s main oil-producing province, eased on Tuesday thanks to cooler weather. The wildfires forced oil and gas producers to shut in at least 319,000 barrels of oil equivalent per day (boepd), or 3.7% of the country’s production.
Investors are also monitoring comments made by U.S. President Joe Biden and top Republican lawmakers regarding raising the $31.4 trillion U.S. debt ceiling. They fear an unprecedented default if Congress does not act within the next three weeks.
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