ALBAWABA — Oil prices fell on Wednesday as concerns about fuel demand and investor restlessness ahead of the publication of the minutes from the most recent United States Federal Reserve policy meeting weighed in, buoyed by expectations for higher Fed rates to keep inflation in line.
Brent crude futures for April delivery were down $2.15, or 2.6 percent, to $80.62 a barrel at 1849 GMT, while the West Texas Intermediate crude futures dropped by $2.21, or 2.89 percent, to $74.15 a barrel.
The minutes from the Fed policy meeting may shed light on projected interest rates moves that could be taken to slow inflation and cool an economy that has remained stronger than expected despite monetary tightening.
Higher interest rates tend to lift the dollar, making dollar-denominated oil more expensive for holders of other currencies, hence reducing overall demand.
“While better U.S. economic data should mean better oil demand, the concern is that this forces the Fed to overtighten monetary policy to bring inflation under control,” UBS analyst Giovanni Staunovo told Reuters. “This is also supporting the U.S. dollar, which is not of help for oil.”
Expectations of tighter global supplies and rising demand from China were offset by a rise in U.S. crude inventories, exacerbating demand worries.
Russia weighs in on oil prices with it plan to cut crude oil production by 500,000 barrels per day, or about 5 percent of its output, in March after the Price Cap Coalition, composed of Australia, Canada, the European Union, Japan, the United Kingdom, and the U.S., imposed price caps on Russian oil and oil products.
Minutes from the U.S. Federal Reserve's latest policy meeting are due later on Wednesday.
“Brent continues to ping-pong between the $80 and $85 level as the US hard landing narrative collides with China’s reopening narrative,” Rebecca Babin, a senior energy trader at CIBC Private Wealth, told Bloomberg. “We just keep replaying the same narratives and end up where we started.”