Oil prices experienced a decline on Wednesday, continuing the trend of sharp losses from the previous session. This occurred despite a report indicating a larger-than-expected drop in U.S. crude inventories last week. The cause for the decline is attributed to weak economic data, which has sparked concerns about a potential recession in the world's largest economy.
Brent Crude and WTI Prices Fall by 1.3% and 1%, Respectively
Brent crude fell by $1.08, or 1.3%, to $79.69 a barrel by 10:54 a.m. EDT (1454 GMT). U.S. West Texas Intermediate crude decreased 76 cents, or 1%, to $76.31.
U.S. Crude Oil Inventory Dips by 5.1 Million Barrels, Surpassing Expectations
The Energy Information Administration (EIA) reported that U.S. crude oil inventories decreased by 5.1 million barrels to 460.9 million last week, greatly exceeding analysts' expectations in a Reuters poll for a 1.5 million-barrel drop.
Gasoline and Distillate Stocks Also Decline, According to EIA
The EIA also noted that gasoline and distillate stocks fell by 2.4 million barrels to 221.1 million barrels and almost 600,000 barrels to 111.5 million, respectively.
Recession Fears Outweigh Supportive EIA Data Points in Oil Market
Matt Smith, a lead oil analyst for the Americas at Kpler, commented that despite the significant crude draw, prices remain in negative territory as demand concerns and fears of recession overshadow the more supportive EIA data points.
Oil Gains Erased Since OPEC+ Output Reduction Announcement
Oil prices have lost all their gains since the Organization of the Petroleum Exporting Countries (OPEC) and producer allies, such as Russia, collectively known as OPEC+, announced additional output reductions in early April, set to last until the end of the year.
OPEC+ Tool Effective for Coordination on Global Oil Markets, Says Russian Deputy PM
On Wednesday, Russian Deputy Prime Minister Alexander Novak stated that OPEC+ remains an efficient tool for coordination on global oil markets.
Interest Rate Hike Expectations and Economic Concerns Impact Oil Prices
On Tuesday, oil prices plunged more than 2% due to ongoing economic concerns and expectations of further interest rate hikes. This could hinder fuel demand growth and counteract signs of improving short-term consumption gains.
U.S. Consumer Confidence Hits Nine-Month Low, Fueling Recession Fears
U.S. consumer confidence fell to a nine-month low in April as concerns grew, increasing the risk of the economy falling into a recession this year. PVM Oil's Stephen Brennock claimed that this data supports the notion that the U.S. economy is inching closer to a recession.
Investors Wary of Potential Interest Rate Hikes Impacting Economic Growth and Energy Demand
Investors also feared that possible interest rate hikes by central banks fighting inflation could slow economic growth and affect energy demand in the United States, Britain, and the European Union.
Upcoming Central Bank Meetings Expected to Result in Rate Hikes
The U.S. Federal Reserve, the Bank of England, and the European Central Bank are all anticipated to raise rates at their upcoming meetings. The Federal Reserve's meeting will take place on May 2-3.