Oil prices fell on Wednesday, ending a three-day rally as an unexpected rise in U.S. oil inventories sparked demand concerns and investors awaited inflation data for a steer on U.S. interest rates.
Brent crude dropped $1.01, or 1.3 percent, to $76.43 a barrel by 0855 GMT, while U.S. West Texas Intermediate (WTI) crude fell 99 cents, or 1.3 percent, to $72.72.
In a possible sign of weakening demand, U.S. crude inventories rose by about 3.6 million barrels in the week ended May 5, while gasoline stockpiles rose by 399,000 barrels, the American Petroleum Institute was reported as saying by market sources on Tuesday.
The data defied expectations from eight analysts polled by Reuters for a drawdown of 900,000 barrels of crude and a 1.2 million barrel drop in gasoline stocks. U.S. government data on oil inventories is due on Wednesday.
The surprising U.S. inventory build, along with lower crude imports and April’s softer export growth in China, exacerbated worries about global oil demand.
“Crude futures were unwinding Tuesday’s modest gains early Wednesday as economic worries occupied center stage, especially over the world’s two largest economies,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
The market is awaiting U.S. consumer price index (CPI) figures for April on Wednesday.
New York Fed President John Williams said inflation remains too high and the central bank will raise rates again if necessary, even though the Federal Reserve dropped guidance about the need for future hikes.
The market is also awaiting the monthly oil report from the Organization of the Petroleum Exporting Countries (OPEC) on Thursday for clues on whether the group and its allies will need to cut output again to prop up prices.
OPEC and its allies, together known as OPEC+, agreed last month to cut production by 1.16 million barrels per day (bpd) from May through the end of the year.
Meanwhile, markets were monitoring U.S. President Joe Biden and top Republican lawmakers’ comments on raising the $31.4 trillion U.S. debt ceiling, fearing an unprecedented default if Congress does not act in the next three weeks.