Oil futures finished lower on Wednesday, with U.S. benchmark prices at their lowest in about three weeks, after the Energy Information Administration reported an increase in U.S. crude supplies for a sixth week in a row.
Oil traders, meanwhile, factored in the OPEC+ committee’s recommendation for the Organization of the Petroleum Exporting Countries and their allies to keep their current production policy in place.
Prices for oil continued lower after the Federal Reserve announced a quarter-percentage-point increase in a key U.S. interest rate, as expected.
- West Texas Intermediate crude for March delivery CL00,
-2.59%CL.1, -2.60%CLH23, -2.60%fell $2.46, or 3.1%, to settle at $76.41 a barrel on the New York Mercantile Exchange, the lowest front-month contract finish since Jan. 10, according to Dow Jones Market Data.
- April Brent crude BRN00,
+0.42%BRNJ23, +0.42%, the global benchmark, lost $2.62, or 3.1%, at $82.84 a barrel on ICE Futures Europe.
- March gasoline RBH23,
-4.15%fell 4.4% to $2.4538 a gallon, while March heating oil HOH23, -5.86%declined by 6.2% at $2.9511 a gallon.
- March natural gas NGH23,
-7.12%fell nearly 8.1% at $2.468 per million British thermal units, a day after posting the biggest monthly decline in 22 years.
“Numbers from the EIA showed surprising builds across the board,” including in the Cushing, Okla. Nymex delivery hub, Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch.
The energy complex is weak and could get even weaker, with any additional weakness likely offering an “opportunity to add to long positions,” he said. “With the reopening of China and recent strength in several other commodities, we feel the risk is to the upside in the energy complex.”
The Energy Information Administration on Wednesday reported that U.S. crude inventories rose by 4.1 million barrels for the week ended Jan. 27. That followed five consecutive weeks of increases reported by the EIA.
On average, analysts forecasted a climb of 300,000 barrels, according to a poll conducted by S&P Global Commodity Insights. The American Petroleum Institute, an industry trade group, late Tuesday reported a 6.3 million barrel rise in U.S. crude inventories last week, according to a source citing the data.
Domestic crude stocks have climbed above 450 million barrels for the first time since June 2021, “driven by ongoing subdued refining activity and higher imports,” said Matt Smith, lead oil analyst, Americas, at Kpler.
“Refining activity remains subdued due to both the lingering impacts of December’s winter storm, as well as the onset of seasonal maintenance,” he said in emailed commentary.
The EIA report also showed weekly inventory increases of 2.6 million barrels for gasoline and 2.3 million barrels for distillates. The analyst survey had forecast gasoline stockpiles as largely unchanged, and forecast a supply decline of 1.3 million barrels for distillates.
Crude stocks at the Cushing, Okla., Nymex delivery hub climbed by 2.3 million barrels for the week, the EIA said, while stocks in the Strategic Petroleum Reserve were unchanged at 371.6 million barrels.
An OPEC+ committee meeting Wednesday in Vienna reaffirmed their commitment to the agreement put in place in October. At the October OPEC+ meeting, members of the alliance agreed to cut overall production by 2 million barrels per day through the end of 2023. The meeting wasn’t expected to result in any changes to oil production levels.
Also see: The EU’s latest embargo on Russia will keep diesel prices high
Meanwhile, the Fed, as had been widely expected, raised the fed-funds rate by 25 basis points at its first policy meeting of the year Wednesday afternoon.
The Fed statement said the Federal Open Market Committee “anticipates that ongoing increases in the target range will be appropriate to attain a stance of monetary policy ” that is sufficiently restrictive to return inflation to 2% over time. “The statement does sound quite hawkish,” said Tyche Capital’s Zahir.
In a press conference following the announcement, Fed Chair Jerome Powell warned against “prematurely loosening policy.”
Traders have been concerned that the Fed’s efforts to ease inflation may lead to a recession, lowering demand for energy.