Oil prices steadied on Wednesday as industry data showed an unexpected draw in U.S. crude oil inventories, after the market tumbled in the previous session on fears that more aggressive U.S. interest rate hikes would hit demand.
Brent crude futures rose 18 cents, or 0.2%, to $83.47 per barrel by 0452 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 4 cents to $77.62 a barrel.
Data from the American Petroleum Institute showed U.S. crude inventories fell by about 3.8 million barrels in the week ended March 3, according to market sources. The drawdown defied forecasts for a 400,000 barrel rise in crude stocks from nine analysts polled by Reuters.
However, near-term drivers pointed towards a more bearish outlook as investors braced for steeper U.S. rate hikes.
“Fed Chair Powell’s comments on ‘higher for longer’ rates spooked markets and sent risk assets, including commodities, sharply down overnight. The short rebound in oil prices today may be due to profit-taking as nothing has changed fundamentally,” said Tina Teng, an analyst at CMC Markets.
Traders were awaiting crude inventory data from the U.S. Energy Information Administration later on Wednesday, after the API data showed a decline in crude inventories for the first time after a 10-week build, she added.
Both Brent and WTI fell more than 3% on Tuesday after comments by U.S. Federal Reserve Chair Jerome Powell that the central bank would likely need to raise interest rates more than expected in response to recent strong data.
“This raised concerns of weaker demand in the U.S.,” ANZ Research analysts said in a note to clients.
Powell’s comments propelled the U.S. dollar, which typically trades inversely with oil, to hit a three-month high against a basket of currencies.
The dollar index rose as high as 105.65, up 1.3% on Tuesday and the highest since Dec. 6.
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