WTI turns red near $81.50 on hawkish Fed comments

Western Texas Intermediate (WTI) is trading around $81.50 on Wednesday, as the US crude oil benchmark edges lower amid the recovery of the US Dollar and a surprise jump in U.S. crude and gasoline stocks.

Hawkish comments by a Federal Reserve policymaker early Thursday lifted the Greenback across the board.

Fed Governor Christopher Waller, one of the most hawkish Fed officials, said that the US central bank is not in a hurry to lower the benchmark interest rate and may need to retain the current rate target for longer than previously expected.

A firmer USD weighs on WTI prices as it makes dollar-denominated oil more expensive for holders of other currencies, dampening oil demand.

Additionally, US crude oil inventories rose by 3.165 million barrels for the week ending March 22 from a decline of 1.952 million barrels, according to the Energy Information Administration (EIA). A surprise US crude inventories build also contributed to the pressure on WTI prices.

Tighter supply

On the other hand, the escalating geopolitical tensions in the Middle East and the Russia-Ukraine war could raise fears of tighter worldwide supply and cap the downside of WTI prices.

Ukraine has been striking Russia’s oil infrastructure since the start of the conflict, but intensified its attacks in late 2023. There have been seven drone attacks this month alone, and experts estimate that the disruptions have impacted almost 12% of Russia’s total oil processing capacity.

The Organisation of Petroleum Exporting Countries and its OPEC-plus allies decided to extend output cuts of around 2.2 million bpd until the end of June. OPEC+ is expected to affirm its production cuts policy until a full ministerial meeting in June.

Oil traders will watch the US Gross Domestic Product annualised (GDP) for the fourth quarter on Thursday, which is estimated to remain steady at 3.2%.

On Friday, the US Personal Consumption Expenditures Price Index (PCE) data for February and Fed’s Powell will be in the spotlight.

(Source: OANDA)