Oil prices fell on Wednesday with reports that the US Federal Reserve (Fed) would maintain a cautious approach to interest rate cuts, a buildup in US oil inventories and concerns over President Donald Trump’s tariff decisions, while ongoing supply concerns stemming from the Russia-Ukraine conflict continued to weigh on the market.
The international benchmark Brent crude fell by 0.7%, trading at $76.19 per barrel at 10.55 a.m. local time (0755 GMT), down from $76.72 at the close of the previous session.
The US benchmark West Texas Intermediate (WTI) decreased by 0.8%, settling at $72.46 per barrel, compared to its prior session close of $73.02.
Oil prices continued its downward movement on Wednesday amid uncertainty over Fed’s interest rate cut decision.
The Fed Chairman Jerome Powell said on Tuesday that the US Federal Reserve is in no hurry to adjust its policy stance, during a congressional committee.
‘With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,’ Powell told the Senate’s Banking, Housing, and Urban Affairs Committee.
Powell explained that they will evaluate incoming data, the evolving outlook, and the balance of risks when assessing the scope and timing of additional adjustments to the policy rate.
‘If the economy remains strong and inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly,’ he noted.
The bank’s cautious approach signals a potential slowdown in economic activity in the world’s largest oil-consuming nation, further contributing to the decline in prices.
The downward movement in oil prices was further supported by data suggesting a larger-than-expected rise in US oil stocks, reflecting market concerns about weakening domestic demand.
Projections from the American Petroleum Institute (API) indicated a 9 million barrels increase in commercial crude oil inventories, for the week ending Februry 7, contrary to market expectations of a 2.8 million barrel rise.
Official figures from the US Energy Information Administration (EIA) are expected later today. If these figures confirm the increase in crude oil inventories, prices are expected to fall further.
Meanwhile, Trump’s decision to impose a 25% tariff on steel and aluminum imports, as well as tariffs on key US trading partners, raised concerns that ‘trade wars’ could escalate. Comprehensive tariffs are expected to suppress oil prices in the short term.
By Duygu Alhan
