By Nicole Jao
NEW YORK (Reuters) -Oil prices fell more than 1% on Wednesday, retreating for a third day in a row, after Fed officials reignited concerns about oil demand when they indicated interest rate cuts could be delayed due to the persistent inflation.
futures closed 98 cents lower, or 1.18%, at $81.90 a barrel. U.S. West Texas Intermediate crude (WTI) fell $1.09, or 1.39%, to $77.57. Both benchmarks closed about 1% lower on Tuesday.
Federal Reserve officials indicated at their latest policy meeting that inflation could take longer to subside than previously thought, according to minutes of the Federal Reserve’s May policy-setting meeting released Wednesday.
Lower interest rates lower financing costs, freeing up resources that can stimulate economic growth and oil demand.
“I didn’t expect there would be rate cuts before any of the fall meetings,” said John Kilduff of Again Capital.
Also in the US, the Energy Information Administration said crude oil stock prices rose 1.8 million barrels in the week ended May 17. That compares with a decline of 2.5 million barrels that analysts had predicted in a Reuters poll and an increase of 2.48 million barrels shown in the Reuters poll. data from the American Petroleum Institute (API), an industry group. [EIA/S] [EIA/S]
“There was strong demand from refineries for gasoline and gasoline demand was one of the highest we have seen in a long time,” Kilduff said. Some of that increase in demand was due to suppliers stockpiling ahead of Memorial Day weekend, he noted.
Crude oil markets are under pressure from weakening fundamentals such as falling Brent versus futures and weaker refining margins. This will likely force OPEC+ to extend production cuts at the June meeting to support prices, said Ole Hansen, head of commodity strategy at Saxo Bank.
Physical crude oil markets have weakened. In another sign that concerns about tight, fast supplies are easing, Brent’s first-month contract premium over the second month, known as backwardation, is near the lowest since January.
“The view on the fundamental outlook remains bleak,” said Tamas Varga, analyst at oil broker PVM.
