Oil prices dipped slightly in Asian trading on Wednesday, extending the sharp losses seen in the previous session. This decline was driven by ongoing concerns about global demand and an unexpected rise in U.S. inventories.
Profit-taking also contributed to the downturn after recent gains fueled by worries over supply disruptions due to geopolitical tensions in Russia and the Middle East.
Brent crude futures for August delivery fell 0.1% to $84.90 a barrel, while West Texas Intermediate (WTI) crude futures also dropped 0.1% to $80.78 a barrel by 20:32 ET (00:32 GMT).
Despite the decline, both benchmarks have posted significant gains over the past two weeks, as geopolitical tensions, including Israeli airstrikes on Gaza and Ukrainian attacks on Russian refineries, have led traders to factor a risk premium into oil prices.
Unexpected Build in U.S. Inventories – API Report
Data from the American Petroleum Institute (API) revealed on Tuesday that U.S. oil inventories increased by approximately 0.9 million barrels in the week ending June 21. This was contrary to expectations of a 3 million barrel drawdown.
This build followed a 2.3 million barrel increase in the previous week, heightening concerns about sluggish U.S. fuel demand despite the onset of the summer travel season.
The API’s data typically precedes similar findings in the official inventory report due later on Wednesday.
Rate Hike Concerns and Strong Dollar Weigh on Oil Prices
While oil prices have seen robust gains in recent weeks, these gains have been tempered by fears of high U.S. interest rates, which have bolstered the dollar. The dollar hovered near two-month highs as signs of resilience in the U.S. economy fueled expectations that the Federal Reserve could maintain higher interest rates for longer.
This week, market focus is on the Personal Consumption Expenditures (PCE) price index data, the Fed’s preferred measure of inflation, which is expected to influence the central bank’s rate decisions.
Additionally, several Federal Reserve officials have issued hawkish statements, reinforcing concerns that prolonged high interest rates could dampen economic activity and, consequently, oil demand.
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