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Oil prices retreated on Thursday after rising for two sessions, with investors still showing lingering concern over a possible U.S. recession and weaker oil demand, Trend reports with reference to Reuters.
Brent crude fell 20 cents, or 0.2%, to $87.13 a barrel by 0352 GMT, while U.S. West Texas Intermediate slid 15 cents, or 0.2%, to $83.11.
Both benchmarks rose 2% on Wednesday to their highest in more than a month as cooling U.S. inflation data spurred hopes the Federal Reserve is likely to stop hiking interest rates.
Previous tightening, however, which has lifted interest rates to their highest since 2007, raised concerns that the Fed’s focus on halting inflation may throttle economic growth and future oil demand in the world’s biggest oil user.
“Talks of a possible U.S. recession highlighted in the recent Fed minutes continue to bring the oil demand outlook into question, which is being negated by tighter supply conditions for now,” said Yeap Jun Rong, a market strategist at IG.
The U.S. Consumer Price Index (CPI) climbed 0.1% last month, below economists’ expectations for a 0.2% gain, and down from a 0.4% increase in February, raising expectations the Fed is likely to stop hiking rates after a possible increase in May.
The Fed’s staff assessing the potential fallout of banking stress, though, projected a “mild recession” later this year.
“The rally has ended due to worries that a possible U.S. recession will weaken crude oil demand,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.
“WTI rose above $83 a barrel, near its highest technical cap since last December, which also prompted a sense of caution among investors,” he said.
Markets on Wednesday shrugged off a small build in U.S. crude oil stocks, attributing it in part to a congressionally mandated release of oil from the U.S. emergency reserve and lower exports at the start of the month.
Crude inventories rose by 597,000 barrels last week, the Energy Information Administration said on Wednesday, compared with analysts’ expectations in a Reuters poll for a 600,000-barrel drop. Gasoline and distillate stocks, meanwhile, drew down less than expected.
The Biden administration plans to refill the U.S. Strategic Petroleum Reserve soon, and hopes to do it at lower oil prices, U.S. Energy Secretary Jennifer Granholm said on Wednesday.
Still, the oil market was jolted higher two weeks ago after the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia agreed to curtail output.
As a result, the global oil market could see tightness in the second half of 2023, which would push prices higher, said Fatih Birol, executive director of the International Energy Agency.
