LONDON: Oil prices fell sharply on Wednesday, extending Tuesday’s losses, driven by fears that more aggressive U.S. interest rate hikes would hit demand, while the market awaited further clarity on inventories.

Brent crude futures were down 91 cents, or 1.1%, to $82.38 per barrel at 1411 GMT. U.S. West Texas Intermediate (WTI) crude futures slipped $1.11, or 1.4%, to $76.47 a barrel.

Both Brent and WTI fell by more than 3% on Tuesday after comments by U.S. Federal Reserve Chair Jerome Powell that the central bank would likely need to raise interest rates more than expected in response to recent strong data.

“Fed Chair Powell’s comments on ‘higher for longer’ rates spooked markets and sent risk assets, including commodities, sharply down overnight,” said Tina Teng, an analyst at CMC Markets.

A stronger dollar also capped oil prices. Powell’s comments had propelled the U.S. dollar, which typically trades inversely with oil, to hit a three-month high against a basket of currencies.

U.S. private payrolls increased more than expected in February, pointing to continued labor market strength.

Oil steadies after dipping on China outlook

Barclays lowered its 2023 Brent forecast by $6 to $92 a barrel and WTI by $7 to $87, “due primarily to more resilient-than-expected Russian supplies,” the bank said.

“ expect the continued recovery in civil aviation demand in China and neighboring countries, a stabilisation in industrial activity and slower non-OPEC+ supply growth to drive the oil market balance into a deficit later this year,“ the bank added.

Traders were also awaiting crude inventory data from the U.S. Energy Information Administration later on Wednesday, after American Petroleum Institute (API) data showed a decline in crude inventories for the first time after a 10-week build.

Data from the API showed U.S. crude inventories fell by about 3.8 million barrels in the week ended March 3, according to market sources.

The drawdown defied forecasts for a 400,000 barrel rise in crude stocks from nine analysts polled by Reuters.

Meanwhile, gasoline inventories rose by about 1.8 million barrels, while distillate stocks rose by about 1.9 million barrels, according to the sources.