Oil prices fell early on Wednesday as the market assessed the latest hints from the Fed that one more rate hike could be coming in early May, which intensified concerns about a material economic slowdown that could weigh on oil demand.
Early on Wednesday morning, the U.S. benchmark WTI Crude was down by 2.07% at $79.19, and the international benchmark Brent Crude was down by 2.05% on the day at $83.03.
Prices dipped on Wednesday after having risen on Tuesday following the industry report from the American Petroleum Institute (API), which estimated that both crude oil and product inventories in the United States fell last week.
Official data on inventories is due out later today from the EIA.
Comments from a Fed official on Tuesday suggested that another small rate hike could be needed offset bullish economic data out of China. The world's second-biggest economy and top crude oil importer posted GDP growth of 4.5% in the first quarter of 2023, beating analyst estimates of 4% economic growth in a Reuters poll. The growth was the highest quarterly Chinese growth since the first quarter of 2022.
However, Atlanta Federal Reserve President Raphael Bostic told CNBC on Tuesday that one more rate hike is coming.
"One more move should be enough for us to then take a step back and see how our policy is flowing through the economy, to understand the extent to which inflation is returning back to our target," Bostic told CNBC's "Squawk on the Street".
"If the data come in as I expect, we will be able to hold there for quite some time," said Bostic, who is a non-voting member of the Federal Open Market Committee (FOMC) this year.
"Having failed to build on the OPEC+ production news a couple of weeks of ago, the market could now be exposed to some long liquidation from recently established longs," Saxo Bank analysts said on Wednesday. "Brent is currently trading below $85, and a break below $83.50 could prompt a fresh attempt to close the gap down to $80 (for WTI, between $79 and $75.70)."
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More