By Ambar Warrick
Investing.com — Oil prices fell on Wednesday following a stellar rally in the prior session, as traders stepped back to digest mixed signals on U.S. crude inventories and awaited more information on supply disruptions caused by an earthquake in Turkey.
Data from the American Petroleum Institute (API) showed that unexpectedly shrank by 2.1 million barrels in the week to February 3. The reading heralds a similar trend in due later in the day, which is forecast to show an inventory build of 2.457 million barrels.
But the API data also showed that gasoline and distillate stockpiles grew in the past week, indicating that retail fuel consumption – a major driver of U.S. demand – still remained under pressure.
U.S. crude inventories expanded over the last six weeks, raising some concerns over demand in the world’s largest oil consumer, as it grapples with relatively high inflation and rising interest rates.
futures fell 0.5% to $83.68 a barrel, while futures fell 0.3% to $77.28 a barrel by 20:51 ET (01:51 GMT). Both contracts rallied over 4% on Tuesday.
Supply disruptions caused by a major earthquake in Turkey saw oil prices increase sharply this week. Recent media reports suggested that an Iraqi pipeline to Turkey’s Ceyhan oil export hub had resumed flows.
But exports of Azeri crude were still halted, amid much uncertainty over when supply would resume after a series of earthquakes battered Turkey earlier this week.
Mild weakness in the benefited crude prices this week, as the greenback pulled away from recent highs on mixed signals on monetary policy from on Tuesday. While Powell warned that interest rates could rise further due to strength in the jobs market, he acknowledged that the country was seeing some disinflation after a series of sharp rate hikes through 2022.
Fears of rising interest rates have been a key source of anxiety for crude markets this year, with traders fearing that an ensuing slowdown in economic growth could dent global crude demand.
But concerns over such a slowdown were offset by renewed optimism over a recovery in Chinese demand, after the world’s largest crude importer relaxed most anti-COVID restrictions earlier this year. The International Energy Agency expects global crude demand to hit record highs this year on a Chinese recovery.
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