Oil futures posted a second straight decline on Wednesday under pressure from Federal Reserve Chairman Jerome Powell’s comments on the outlook for US interest rates.
A government report showing the first weekly US crude inventories fall in 11 weeks failed to provide much support for prices.
Powell warned Tuesday in testimony before the Senate Banking Committee that interest rates would need to rise higher than before to bring inflation under control. They opened the door for higher interest rate hikes in the upcoming meetings than previously expected.
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In testimony before a House committee on Wednesday, the Fed chair said no decision has been made on the size of a potential rate hike in March.
Sevens co-editor Tyler Ritchie said Powell’s comments before the Senate on Tuesday “sent a clear message that economic data in the near term will be critical to the pace of future rate hikes and ultimately to the process of deciding on the terminal rate.” ” report research. He told Marketwatch that traders focused on Wednesday’s labor-market report.
“While there was favorable evidence of slowing wage growth in the ADP data, both of this morning’s employment releases point to a still healthy and resilient labor market,” he added. This “strengthens the case for continued accommodative policy by the Fed, and it increases the risk of a sharp economic downturn later in the year.”
“A potentially deep recession in the quarters ahead will clearly worsen the economic environment for oil and refined products, as consumer demand will be hit hard,” Ritchie said.
Tuesday’s comments from Powell sent shivers through financial markets. Short-term Treasury yields rose, boosting the US dollar, while stocks fell.
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The Energy Information Administration reported on Wednesday that US crude inventories fell by 1.7 million barrels for the week ending March 3. The EIA earlier reported an increase in weekly crude oil supplies for 10 consecutive weeks.
Analysts on average forecast an increase of 700,000 barrels, according to a poll by The Wall Street Journal. The American Petroleum Institute on Tuesday reported a drop of 3.8 million barrels in US crude inventories last week, according to a source citing the data.
The EIA said crude stockpiles at the Cushing, Okla., Nymex delivery hub declined by 900,000 barrels for the week.
“The report marks the first draw this year for both commercial inventories and Cushing,” said Matt Smith, principal oil analyst for the Americas at Kepler. “The draw at Cushing comes after nine consecutive builds – a sign of health on the US Gulf Coast amid strong exports and rising refining activity.”
The EIA report showed a weekly inventory decline of 1.1 million barrels for gasoline, while distillate supplies rose by 100,000 barrels. The analyst survey had projected an inventory decline of 1.4 million barrels for gasoline and 1 million barrels for distillates.
EIA data includes a downward adjustment For crude stocks of 384,000 barrels per day for the week ending March 3. following an upward adjustment of 2.266 million-barrels the week before.
“The move from large positive adjustments to small negative adjustments helps confirm not only that the record pace of exports last week was very high, but that exports were under-reported in the weekly data released today,” Troy Vincent, a senior market analyst at DTN told MarketWatch.
Kepler’s Smith reported that crude exports exceeded 4.5 million barrels a day “for the first time on our record – a sign of things to come this month amid strong buying interest from Asia.”
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Credit: www.marketwatch.com /