Oil Prices Fall After Three Days Amid Fed Uncertainty And Rising U.S. Inventories

Oil prices remained subdued on Thursday as hawkish remarks from Federal Reserve officials bolstered the dollar and stoked fears of additional interest rate hikes, while U.S. oil stocks increased for a seventh consecutive week.

Given that inflation is still heading substantially beyond the central bank's target, markets reassessed their forecast for U.S. interest rate hikes this year following hawkish overnight remarks from Federal Reserve policymakers.

This strengthened the currency, which weighed on the crude market. The potential of increasing U.S. interest rates also bodes poorly for oil, given that the accompanying downturn in economic activity might further impede demand.

Fears of a more hawkish Fed returned after stronger-than-anticipated U.S. employment statistics shook crude markets last week.

By 20:50 ET, Brent oil prices were unchanged at $85.19 per barrel, while West Texas Intermediate crude futures increased 0.1% to $78.58 per barrel (01:50 GMT). Both contracts increased by as much as 6% over the preceding three days and were trading around their highest levels in two weeks.

Optimism over a demand resurgence in China and supply interruptions caused by an earthquake in Turkey and Syria fueled big rises in petroleum prices this week. Earlier this week, the International Energy Agency confirmed its projection for a robust recovery in Chinese demand this year.

While some pipeline flows from Iraq to Turkey have restarted after being halted earlier this week, inclement weather has prevented the resumption of exports from the major port of Ceyhan. This trend foretells a near-term shortfall of supplies to areas of Europe and Israel.

However, this was offset by predictions of a supply surplus in the United States, the largest oil user in the world. Wednesday's government statistics indicated that U.S. oil inventories increased for the seventh straight week, with gasoline and distillate stockpile increases indicating that demand for retail fuel remained weak.

In the following days, the focus will be on a succession of inflation figures from big nations, beginning with China on Friday. The markets will closely monitor if price pressures have eased in the country since the majority of anti-COVID measures were loosened earlier this year.

Next week's U.S. inflation report is anticipated to influence monetary policy in the coming months.