Meanwhile, Russia continues to defy the European Union sanctions: File Image/Pixabay
Even though they have long been regarded as inevitable among financial experts and warned of by those who will enact them, the fear generated by the U.S. Federal Reserve suggesting it would impose aggressive rate hikes to combat inflation continued to spook crude traders, and as a result the commodity on Wednesday extended its losses.
Brent settled down 63 cents, or 0.8 percent, to $82.66 per barrel, and West Texas Intermediate settled down 92 cents, or 1.2 percent, to $76.66 per barrel.
On Tuesday fed chair Jerome Powell said the central bank would likely need to raise interest rates more than anticipated in response to strong economic data, and that a return to larger rate increases instead of quarter-percentage-point steps might happen.
Andrew Lipow, president, Lipow Oil Associates
Oil prices are still seeing downward pressure
Wednesday's trading jitters weren't assuaged by unexpected drops in U.S. stockpiles; specifically, crude stocks fell 1.7 million barrels last week compared with estimates for a 395,000 increase (it was the first decline in such inventories after a 10-week build).
However, U.S. gasoline stocks grew by 1.1 million barrels, and although this was less than the 1.8 million forecast, it still stoked demand concerns.
Russia continuing to have success with crude transactions despite the European Union sanctions also influenced banks to lower their commodity price forecasts, thus adding to market gloom.
Barclays lowered its 2023 Brent forecast by $6 to $92 per barrel and by $7 to $87 for WTI, "due primarily to more resilient-than-expected Russian supplies," according to the bank, but added that "We expect the continued recovery in civil aviation demand in China and neighbouring countries, a stabilization in industrial activity and slower non-OPEC+ supply growth to drive the oil market balance into a deficit later this year."
The latest developments in Russian transactions suggest the much ballyhooed sanctions aren't having anything close to the devastating effect its architects had hoped for: offer levels for Russia's Urals and ESPO crude, as well as fuel oil, surged over the past weeks, according to traders with knowledge of the matter.
This was due to increased interest from Chinese state-owned and large private refiners such as Sinopec, PetroChina Co., and Hengli Petrochemical Co., as well as a surge in demand from India.
Andrew Lipow, president of Lipow Oil Associates, summarized Wednesday's trading behaviour by remarking, "Oil prices are still seeing downward pressure due to the hawkish comments coming out of the Fed indicating higher interest rates for a longer period of time."