© Reuters. FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Lowen County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant
NEW YORK (Reuters) – Oil prices were little changed on Wednesday after a build in U.S. oil inventories and U.S. inflation data supported another sharp interest rate hike by the Federal Reserve.
Crude oil was down 39 cents at $99.10 a barrel by 1:18 p.m. ET (1718 GMT), while U.S. West Texas Intermediate was down 10 cents at $96.74 a barrel .
Investors have been selling oil lately on fears that sharp interest rate hikes to curb inflation will slow economic growth and hit oil demand. Prices fell more than 7 percent in choppy trading on Tuesday, closing below $100 for the first time since April.
“Demand issues are catching up with high prices. The dollar is putting downward pressure on all commodities. There has been a shift in mentality over the past few weeks,” said Tony Headrick, energy market analyst at CHS Hedging.
However, the spot market remains tight. Major benchmarks such as Forties and U.S. Midland are trading above the futures market, painting a different picture than the futures market.
This week, both the Organization of the Petroleum Exporting Countries and the International Energy Agency warned in monthly reports that demand is weakening, especially in the world’s largest economy.
U.S. oil inventories rose more than expected amid tight markets. U.S. commercial crude inventories rose by 3.3 million barrels, government data showed, while inventories were expected to fall slightly. [EIA/S]
Investors remain concerned about the recent weakness in global fuel demand, which has also been seen in the United States.
U.S. consumer prices rose to 9.1% in June amid persistently high gasoline and food costs, cementing the case for the Federal Reserve to raise interest rates by 75 basis points later this month.
Brent crude oil has fallen sharply since hitting $139 in March and is near its all-time high in 2008. China’s new COVID-19 restrictions weighed on the market this week.
The drop in crude futures has yet to be reflected in a strong spot oil market. Forties crude, one of the grades underpinning Brent futures, hit an all-time high on Tuesday at a benchmark premium of $5.35 a barrel.
U.S. Midland crude traded at a premium of $1.50 a barrel to WTI, also reflecting tight supply, but that grade was below the premium reached after the Ukrainian invasion in late February.