Oil Prices Fall On Rising Crude Inventories, Hawkish Fed

Oil prices fell in Wednesday’s morning session, ending three days of gains thanks to rising U.S. crude stockpiles and hawkish remarks from Fed Chair Jerome Powell. Brent crude for April delivery fell 1.51% to trade at $75.86 per barrel at 10.35 am ET while WTI crude for March delivery fell 1.65% to trade at $72.14 per barrel. The decline follows three days of gains when oil prices climbed nearly 4%.

“Oil prices resumed their downtrend as the macro environment weighed on sentiment, with Jerome Powell indicating that the U.S. Fed was not in a rush to lower rates,” Harry Tchilinguirian, head of research at Onyx Capital Group, told Reuters. “At the same time, traders are eyeing this afternoon’s weekly U.S. EIA oil data release, looking to see if the sizeable 9 million barrel build in crude stocks reported by the API yesterday materialises in the official data.”

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The U.S. consumer price index (CPI) increased at a faster-than-expected clip in January, reinforcing the Federal Reserve’s wait-and-see stance before cutting interest rates further amid growing uncertainty over the economy. The CPI jumped 0.5% last month, up from 0.4% in December, and advanced 3.0% in the 12 months through January after advancing 2.9% in December. Traders do not expect another Fed cut until at least September, after previously chalking in a 25 bp cut in June. Jerome Powell said on Tuesday that the Fed is not rushing to cut interest rates further because the economy is in a good place, but it is prepared to do so if inflation drops or the job market weakens. Higher interest rates increase the cost of borrowing, which can slow economic activity and weaken oil demand.

“Today’s data confirms that inflation is still a problem, and obviously it upholds the Fed’s stand on being cautious in lowering interest rates. Coupled with the prospects of the tariffs, it adds to inflation worries, ”Peter Cardillo, chief market economists at Spartan Capital Securities, told Reuters.

By Alex Kimani for Oilprice.com

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