NEW YORK: Oil prices eased about 1% on Wednesday on worries over weak US gasoline demand and economic data that could cause the US Federal Reserve to keep interest rates higher for longer.
High interest rates used to tackle lingering inflation can weigh on economic growth and reduce demand for oil.
Brent futures were down 65 cents, or 0.8%, to $83.57 a barrel by 12:51 p.m. EDT (1651 GMT), while US West Texas Intermediate (WIT) crude fell 55 cents, or 0.7%, to $79.28.
US consumer confidence unexpectedly improved in May after deteriorating for three straight months amid optimism about the labor market, but worries about inflation persisted and many households expected higher interest rates over the next year.
Analysts forecast energy firms added 1.0 million barrels of gasoline into US storage during the week ended May 24 before the start of the peak summer driving season over the Memorial Day holiday weekend. That compares with a decrease of 200,000 barrels of gasoline in the same week last year and an average decrease of 200,000 barrels over the past five years (2019-2023). “Gasoline demand (is) still surprisingly weak in keeping supplies near normal levels as bullish seasonals diminish,” analysts at energy advisory firm Ritterbusch and Associates said.
That weekly US gasoline storage data will come out one day later than usual due to the Memorial Day holiday on Monday along with other US oil storage data from the American Petroleum Institute (API) trade group later on Wednesday and the US Energy Information Administration (EIA) on Thursday.
Investors also are turning their attention to the release on Friday of the US personal consumption expenditures (PCE) price index report for April. The PCE, which is the Fed’s preferred inflation barometer, is expected to hold steady on a monthly basis. Expectations for the timing of rate cuts have see-sawed, with policymakers wary of sticky inflation. In a forecast that should be bullish for crude prices, analysts projected energy firms pulled 1.9 million barrels of US crude out of storage during the week ended May 24. That compares with a build of 4.5 million barrels in the same week last year and an average increase of 1.1 million barrels over the past five years (2019-2023).
Traders and analysts also said they expect OPEC+, which includes the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, to keep voluntary production cuts of about 2.2 million barrels per day (bpd) in place at its meeting on Sunday.