Oil prices extended Tuesday’s losses after new inflation data suggested the Federal Reserve may keep interest rates higher than previously expected.
West Texas Intermediate, the U.S. benchmark, fell 1.8% to $77.64 a barrel. Brent crude, the international standard, was down 1.6% at $84.24 a barrel.
Data on Wednesday showed inflation looks sticky, giving the Fed reasons to keep raising interest rates. That will dampen economic growth and demand for fuel.
However, demand may also prove more resilient. The International Energy Agency on Wednesday revised up its forecast for oil demand to a record level for this year, arguing it will be lifted by China’s reopening after years of Covid-19 restrictions. Demand for crude will reach 101.9 million barrels a day this year, the IEA predicts, some 200,000 barrels a day more than it estimated last month.
Supply seems plentiful for now. U.S. crude inventories climbed by about 10 million barrels last week, according to early reports from the American Petroleum Institute. That’s more than analysts had been expecting.
Oil prices will be determined this year by the balance of demand and supply. While economic growth is slowing, countries may try to prop up prices by cutting output. Russia last week said it would lower production, and the Organization of the Petroleum Exporting Countries lowered output quotas last year.
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