Oil prices fell on Thursday following three sessions of gains, after Federal Reserve Chair Jerome Powell highlighted banking sector credit risks for the world’s largest economy, while US crude stocks rose more than expected.
Brent crude futures had fallen 46 cents, or 0.6 per cent, to $76.23 a barrel by 0720 GMT, while US West Texas Intermediate crude (WTI) dropped 50 cents, or 0.7 per cent, to $70.40.
Both crude benchmarks settled on Wednesday at their highest closes since March 14 after the dollar slid to a six-week low.
Powell said on Wednesday that banking industry stress could trigger a credit crunch, with “significant” implications for an economy that US central bank officials projected would slow even more this year than previously thought.
“Economic risks were being flagged out in the Fed meeting, while higher-than-expected US crude oil stockpiles also dampened some optimism around demand outlook,” said Yeap Jun Rong, market strategist at IG.
However, the weakness in the dollar has been a bright spot in promoting some resilience in oil prices, Yeap said, adding that there was still some upside room left in oil prices.
Prospects of demand recovery in the world’s top crude importer, China, could also keep prices supported.
Goldman Sachs said on Thursday that Chinese demand continued to surge across the commodity complex, with oil demand topping 16 million barrels per day.
Consultancy Wood Mackenzie said that China was expected to account for around 40 per cent of the increase in global oil demand this year as its economy emerged from strict lockdowns.
Meanwhile, US crude oil stockpiles rose unexpectedly last week to their highest in nearly two years, latest data from the Energy Information Administration (EIA) showed.
Crude inventories (USOILC=ECI) rose in the week to March 17 by 1.1 million barrels to 481.2 million barrels, the highest since May 2021. Analysts in a Reuters poll had expected a 1.6-million-barrel drop.
“Despite all the bearish chatter over the US oil production growth outlook for 2023, overstating cost inflation and lower capex (capital expenditure), the latest EIA weekly report confirms the pivotal role of US oil for global oil markets,” Citi analysts said in a note on Thursday.
Gross US exports of crude oil and oil products hit a new high just shy of 12 million barrels per day, way above any other country’s supply levels, the analysts added, citing EIA data.