Oil prices fell on Wednesday, ending a three-day rally due to an unanticipated rise in U.S. oil inventories. This unexpected increase sparked demand concerns as investors awaited inflation data for guidance on U.S. interest rates. Brent crude dropped 1% to $76.69 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 0.9% to $72.97.
Unexpected Growth in Crude Inventories and Gasoline Stockpiles
The American Petroleum Institute reported that U.S. crude inventories rose by approximately 3.6 million barrels in the week ending May 5. Gasoline stockpiles also increased by 399,000 barrels, defying expectations of a drawdown. Market analysts had anticipated a 900,000-barrel decrease in crude and a 1.2 million-barrel drop in gasoline stocks.
Global Oil Demand Worries Intensify
The unexpected U.S. inventory build, lower crude imports, and China's softer export growth in April intensified concerns about global oil demand. Vandana Hari, the founder of Vanda Insights, explained that economic worries took center stage in the market, particularly for the world's two largest economies.
Upcoming U.S. Inflation Data and OPEC Monthly Report
Investors await April's U.S. consumer price index (CPI) figures and the Organization of the Petroleum Exporting Countries (OPEC) monthly oil report for clues on output adjustments. OPEC and its allies, known as OPEC+, agreed last month to cut production by 1.16 million barrels per day (bpd) through the end of the year.
U.S. Debt Ceiling Concerns Loom in Financial Markets
Market participants closely monitor discussions between U.S. President Joe Biden and top Republican lawmakers on raising the $31.4 trillion U.S. debt ceiling. Failure to act within the next three weeks may result in an unprecedented default, causing further unease in the market.