Oil prices fell in Asian trade on Wednesday after industry data showing a surprise, outsized build in U.S. inventories challenged the notion of tighter markets in the near-term.
Pressure from a resilient dollar, ahead of more cues on U.S. inflation and interest rates, also pulled crude prices further off four-month highs hit earlier in March.
Brent oil futures expiring in May fell 0.8% to $85.55 a barrel, while West Texas Intermediate crude futures fell 0.7% to $81.05 a barrel by 21:39 ET (01:39 GMT).
Outsized moves in oil also came amid lower trading volumes before the Good Friday holiday.
US oil inventories surge 9.3 mln barrels- API
Data from the American Petroleum Institute showed that U.S. crude inventories saw a build of 9.3 million barrels in the week to March 22, compared to a drop of 1.5 million barrels in the prior week. The reading was substantially above expectations for a draw of 1.2 million barrels.
API data usually heralds a similar trend in official U.S. inventory data, which is due later on Wednesday. But Tuesday’s reading raised questions over just how tight U.S. crude markets were, especially as oil production remained at record highs of over 13 million barrels per day.
Expectations of tighter global oil supplies- following Russian supply curbs, geopolitical disruptions in the Middle East and increased U.S. refinery activity- powered oil prices to four-month highs earlier in March.
But this also set up crude for some profit-taking, especially in the wake of data potentially questioning the narrative of tight markets.
Still, global fuel markets are expected to remain tight, especially with Russia cutting its gasoline production due to Ukrainian attacks on its refineries.
Dollar weighs ahead of PCE data, Fed speakers
Strength in the dollar- which hovered near one-month highs- also weighed on oil prices, especially as traders pivoted into the greenback ahead of more cues on U.S. inflation and interest rates later this week.
PCE price index data- the Federal Reserve’s preferred inflation gauge, is due on Friday and is widely expected to factor into the central bank’s outlook on interest rate cuts.
Along with the PCE data, addresses from major Fed officials- Chair Jerome Powell and FOMC member Mary Daly- are also due on Friday.
