WTI turns red near $81.50 on Fed’s hawkish comments, a surprise jump in US crude stockpiles
|- TI trades on a softer note near $81.50 on Thursday.
- The high-for-longer rate narrative from the Fed boosts the US Dollar.
- US crude oil inventories rose by 3.165 million barrels for the week ending March 22 from a decline of 1.952 million barrels.
Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $81.50 on Wednesday. WTI prices edge lower amid the recovery of the US Dollar (USD) and a surprise jump in U.S. crude and gasoline stocks.
The hawkish comments from US Federal Reserve (Fed) policymaker early Thursday lift the Greenback across the board. The Fed Governor Christopher Waller, one of the most hawkish Fed officials, said that the US central bank is not in a hurry to lower the benchmark interest rate and may need to retain the current rate target for longer than previously expected. A firmer USD weighs on WTI prices as it makes dollar-denominated oil more expensive for holders of other currencies, dampening oil demand.
Additionally, US crude oil inventories rose by 3.165 million barrels for the week ending March 22 from a decline of 1.952 million barrels, according to the Energy Information Administration (EIA). A surprise US crude inventories build also contributed to the pressure on WTI prices.
On the other hand, the escalating geopolitical tensions in the Middle East and between Russia and Ukraine could raise the fear of tighter global supply and cap the downside of WTI prices. Ukraine has been striking Russia's oil infrastructure since the start of the conflict but intensified its attacks in late 2023. There have been seven drone attacks this month alone, and experts estimate that the disruptions have impacted almost 12% of Russia's total oil processing capacity.
The Organisation of Petroleum Exporting Countries and its allies (OPEC+) decided to extend output cuts of around 2.2 million bpd until the end of June. OPEC+ is expected to affirm its production cuts policy until a full ministerial meeting in June.
Oil traders will watch the US Gross Domestic Product Annualized (GDP) for the fourth quarter (Q4) on Thursday, which is estimated to remain steady at 3.2%. On Friday, the US Personal Consumption Expenditures Price Index (PCE) data for February and Fed’s Powell will be in the spotlight.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.