Jamie Spencer
Oil Prices Retreat After Three-Day Rally
Oil prices fell sharply on Wednesday, reversing a three-day rally, after data revealed a larger-than-expected rise in U.S. crude stockpiles and hawkish remarks from Federal Reserve Chair Jerome Powell dampened market sentiment.
Brent crude futures declined by 96 cents, or 1.25%, to $76.04 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.05, or 1.43%, to $72.27 as of 10:42 a.m. EST. Both benchmarks had gained more than 3.5% over the past three sessions before sliding by over $1 per barrel in Wednesday’s trading.
U.S. Crude Stockpiles Build More Than Expected
The latest report from the Energy Information Administration (EIA) showed a significant increase in U.S. crude inventories last week, surpassing market expectations. The report also indicated a surprise draw in gasoline stocks and an unexpected build in distillate inventories.
“We saw a substantial oil price increase in recent days. So probably there is some profit-taking following the large crude build reported by API, but that might have been influenced by unfavorable weather impacting crude exports as well as refinery maintenance,” said Giovanni Staunovo, an analyst at UBS.
Federal Reserve Comments Weigh on Oil Markets
In addition to the inventory data, traders were also reacting to Federal Reserve Chair Jerome Powell’s remarks on interest rates. Powell stated that the U.S. economy remains in a strong position, and the Fed sees no immediate need to lower interest rates, although it is prepared to act if inflation declines or job market conditions weaken.
Higher interest rates generally slow economic activity by making borrowing more expensive, which in turn can curb oil demand. “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,” noted Harry Tchilinguirian, head of research at Onyx Capital Group.
OPEC and EIA Forecasts Hold Steady
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) maintained its global oil demand growth projections for the next two years. In its latest monthly report, OPEC forecasted that demand will increase by 1.45 million barrels per day (bpd) in 2025 and by 1.43 million bpd in 2026.
The EIA also revised its expectations for U.S. crude production, now predicting an average output of 13.59 million bpd in 2025, up from its previous estimate of 13.55 million bpd. The agency, however, left its demand outlook unchanged.
Looking Ahead: Oil Market Uncertainty Persists
With rising U.S. stockpiles and cautious signals from the Federal Reserve, the outlook for oil prices remains uncertain. While OPEC and the EIA expect steady demand growth, macroeconomic factors like inflation and interest rate decisions could continue to impact crude prices in the coming months.
