Oil prices were steady on Thursday after falling by more than 3 per cent the previous day on a large build-up in US crude stocks and expectations of further interest rate increases.
Brent, the benchmark for two thirds of the world’s oil, was 0.63 per cent lower at $82.32 a barrel at 4.48pm UAE time while West Texas Intermediate, the gauge that tracks US crude, was down 0.42 per cent at $76.09 a barrel.
Brent settled 3.07 per cent lower at $82.84 on Wednesday while WTI closed down 3.12 per cent at $76.41.
“Even as the Opec+ advised to keep output steady, there may be some profit taking under way in oil at the moment as selling pressure has increased in the last few days,” said Edward Bell, senior director of market economics at Emirates NBD.
US crude oil and fuel stocks rose last week to their highest levels since June 2021, according to data from the US Energy Information Administration.
Crude stocks climbed 4.4 million barrels to 452.7 million barrels in the week ending on January 27, much higher than market expectations of a rise of 400,000 barrels per day to 1 million bpd.
The indicator, which shows the level of oil and related products that are stored, gives an overview of US petroleum demand. If the increase in crude stocks is more than expected, it implies weaker demand and is bearish for crude prices.
The US Federal Reserve raised interest rates by 25 basis points and indicated that more increases were to come.
This was its eighth rise since last year. The latest announcement brings the Fed's target range to between 4.50 per cent and 4.75 per cent — about 50 basis points away from its end-of-year projection of 5.1 per cent.
The US central bank said “ongoing increases” would be needed to bring inflation down to its long-term 2 per cent goal.
“It is our judgment that we are not yet at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate,” said Fed Chairman Jerome Powell during a briefing on Wednesday.
The central bank is willing to “overshoot” with tightening, which could be a “drag” for economic growth over the short-term, said Edward Moya, a senior market analyst at Oanda.
Meanwhile, the Opec+ alliance of 23 oil-producing countries agreed to roll over its existing oil output cuts of 2 million bpd amid an improving fuel demand outlook in China, the world’s second-largest economy and top crude importer.
“The [Joint Ministerial Monitoring Committee] reaffirmed their commitment to the [declaration of co-operation] which extends to the end of 2023,” said the alliance.
The committee reviewed crude oil production data for the months of November and December and urged all participating countries to achieve “full conformity”.