Oil prices fell on Thursday following three sessions of gains, after Federal Reserve Chair Jerome Powell highlighted banking sector credit risks for the world’s largest economy, while U.S. crude stocks rose more than expected.
Brent crude futures fell 66 cents, or 0.9 percent, to $76.03 a barrel by 0420 GMT, while U.S. West Texas Intermediate crude (WTI) dropped 74 cents, or 1.0 percent, to $70.16.
Both crude benchmarks settled on Wednesday at their highest close since March 14 after the dollar slid to a six-week low.
“Economic risks were being flagged out in the Fed meeting, while higher-than-expected U.S. crude oil stockpiles also dampened some optimism around demand outlook,” said Yeap Jun Rong, market strategist at IG.
However, the weakness in the dollar has been a bright spot in aiding to drive some resilience in oil prices, with some room left for upside in oil prices amid dip-buying seen at the start of this week, Yeap added.
The Fed raised interest rates by a quarter of a percentage point, while indicating that it was on the verge of pausing further increases in borrowing costs, amid recent turmoil in financial markets spurred by the collapse of two U.S. banks.
Powell said on Wednesday that banking industry stress could trigger a credit crunch, with “significant” implications for an economy that U.S. central bank officials projected would slow even more this year than previously thought.
Meanwhile, U.S. crude oil stockpiles rose unexpectedly last week to their highest in nearly two years, latest data from the Energy Information Administration (EIA) showed.
Crude inventories rose by 1.1 million barrels in the week to March 17 to 481.2 million barrels, the highest since May 2021. Analysts in a Reuters poll had expected a 1.6 million-barrel drop.
“Despite all the bearish chatter over the U.S. oil production growth outlook for 2023, overstating cost inflation and lower capex (capital expenditure), the latest EIA weekly report confirms the pivotal role of U.S. oil for global oil markets,” Citi analysts said in a note on Thursday.
Gross exports of crude oil and oil products hit a new high just shy of 12 million barrels per day, way above any other country’s supply levels, the analysts added, citing EIA data.