After an unexpected increase in US crude stocks, oil prices decline in early trade

14 Jun 2023 , 11:43 AM

After industry data revealed an unexpected increase in U.S. crude stocks on Wednesday, which signalled poor demand to markets already concerned about the recession and disappointing Chinese economic data, oil prices marginally increased.

Brent crude futures had dropped 27 cents, or 0.4%, to $74.01 per barrel. American West Texas Intermediate (WTI) crude was down 29 cents or 0.4% at $69.13 per barrel.

After China’s central bank lowered a short-term lending rate, both benchmarks increased by more than 3% on Tuesday in anticipation of rising fuel demand. Concerns about the Chinese economy following weak economic statistics last week caused prices to drop by 4% on Monday.

In contrast to the average prediction of a 510,000-million-barrel reduction according to analysts polled by Reuters, U.S. crude oil stocks increased by around 1 million barrels in the week ending June 9 according to market sources quoting American Petroleum Institute numbers on Tuesday. 

Later in the day, government stockpile data is expected.

The Federal Reserve meeting, which has no predetermined interest rate hike on the table, was also being eagerly watched by market investors. Rate increases strengthen the dollar, increasing the cost of commodities for holders of other currencies and pushing up prices.

When the rate-setting Federal Open Market Committee meeting closes on Wednesday, a break from rises appears to be in the cards due to the still-too-hot inflation trailing behind but also to the abundance of uncertainties over the economic outlook and the lag effects of the 10 rate hikes since March 2022.

After an unexpected 25 basis point hike last week, economists anticipate that the Bank of Canada will boost interest rates once more in July, to 5.00%.

In an effort to control stubborn inflation, the European Central Bank is also anticipated to raise interest rates by another quarter percentage point on Thursday. However, it is anticipated that the Bank of Japan will continue to adhere to its ultra-loose policy when it releases its plan on Friday.

Russia can now produce more oil under the most recent limits than was previously permitted since OPEC+ has given it a slightly higher baseline for oil output.

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