Oil slips for third day on likely ‘higher for longer’ US rates
Brent crude futures were down US$1.03, or 1.2%, to US$81.85 a barrel, while U.S. West Texas Intermediate crude (WTI) dropped US$1.25, or 1.6%, to US$77.41 as of 0802 GMT
Oil prices fell over 1% on Wednesday, retreating for a third straight day on expectations the Federal Reserve might keep U.S. interest rates higher for longer due to sustained inflation, potentially impacting fuel use in the world’s largest consumer.
The market also slipped as U.S. crude oil and gasoline inventories rose last week, according to market sources citing American Petroleum Institute (API) figures on Tuesday. Analysts expected them to decline.
Brent crude futures were down US$1.03, or 1.2%, to US$81.85 a barrel, while U.S. West Texas Intermediate crude (WTI) dropped US$1.25, or 1.6%, to US$77.41 as of 0802 GMT.
“The view on the fundamental outlook remains grim,” said Tamas Varga of oil broker PVM, adding that “the timing of a Fed rate cut is ambivalent at best”.
Oil settled about 1% lower on Tuesday.
Physical crude markets have been weakening and in another sign that concern of tight prompt supply is easing, the premium of Brent’s first-month contract over the second , known as backwardation, is close to its lowest since January.
Fed policymakers said on Tuesday the U.S. central bank should wait several more months to ensure that inflation really is back on track towards its 2% target before cutting interest rates.
Higher borrowing costs can slow economic growth and pressure oil demand.
Investors are awaiting minutes from the Fed’s last policy meeting and, following the API data, the latest official U.S. oil inventory figures from the Energy Information Administration (EIA) due later on Wednesday.
“The Federal Open Market Committee (FOMC) minutes will be scrutinised for Fed’s assessment of bumpy Q1 inflation and clues on the timing and extent of potential interest rate cuts in 2024,” ANZ analysts said in a report.
Inflation in Britain fell by less than expected in April and a key core measure barely dropped, figures showed on Wednesday, prompting investors to pull bets on a rate cut next month.
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