Oil prices dropped on Wednesday morning, ending a three-day streak of gains. The decline was driven by an increase in U.S. crude stockpiles and hawkish comments from Federal Reserve Chairman Jerome Powell. At 10:35 a.m. ET, Brent crude for April delivery was down 1.51%, trading at $75.86 per barrel. Meanwhile, WTI crude for March delivery fell 1.65%, settling at $72.14 per barrel. This followed a nearly 4% rise in oil prices over the previous three days.
“Oil prices resumed their decline as concerns over the broader economic environment weighed on sentiment. Jerome Powell’s statement that the Fed is not rushing to lower rates added to the pressure,” said Harry Tchilinguirian, head of research at Onyx Capital Group, in an interview with Reuters. “Traders are also waiting for the U.S. EIA oil data release later today to see if the reported 9 million-barrel rise in crude stocks by the API is reflected in the official numbers.”
The U.S. consumer price index (CPI) showed a larger-than-expected increase in January, reinforcing the Fed’s cautious stance on rate cuts as economic uncertainty persists. The CPI rose 0.5% last month, up from 0.4% in December, and increased 3.0% over the past year, compared to 2.9% in December. Traders now do not expect another rate cut from the Fed until at least September, after previously expecting a 25-basis-point reduction in June. Powell stated on Tuesday that the Fed is in no rush to lower rates, given the current state of the economy. However, it stands ready to act if inflation falls or the job market weakens. Higher interest rates raise borrowing costs, which can reduce economic activity and dampen oil demand.
“Today’s data confirms that inflation remains a concern, which supports the Fed’s cautious approach on interest rates,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “Combined with potential tariffs, inflation worries are intensifying.”
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