Oil prices steady after Tuesday’s rout

London — Oil prices steadied after earlier losses on Wednesday, driven by fears that more aggressive US interest rate hikes would hit demand, while the market awaited further clarity on inventories.

Brent crude futures were up 11c, or 0.1%, to $83.40 a barrel by 11.03am, while West Texas Intermediate eased 9c, or 0.1%, to $77.49 a barrel.

Both benchmarks plunged more than 3% on Tuesday after comments by Federal Reserve Chair Jerome Powell that the central bank was likely to raise interest rates more than expected in response to recent strong data.

“Powell’s comments on ‘higher for longer’ rates spooked markets and sent risk assets, including commodities, sharply down overnight,” said Tina Teng, an analyst at CMC Markets.

A stronger dollar also capped oil prices. Powell’s comments had propelled the dollar, which typically trades inversely with oil, to hit a three-month high against a basket of currencies.

Barclays lowered its 2023 Brent forecast by $6 to $92 a barrel and WTI by $7 to $87, “due primarily to more resilient-than-expected Russian supplies”.

“We expect the continued recovery in civil aviation demand in China and neighbouring countries, a stabilisation in industrial activity and slower non-Opec+ supply growth to drive the market into a deficit later this year,” the bank added.

Traders were also awaiting crude inventory data from the US Energy Information Administration later on Wednesday, after data from the American Petroleum Institute (API) pointed to a decline in crude inventories for the first time after a 10-week increase, Teng said.

API data shows US crude inventories fell by about 3.8-million barrels in the week ended March 3, according to market sources.

The drawdown defied forecasts for a 400,000-barrel increase from nine analysts surveyed by Reuters.

Meanwhile, petroleum inventories rose by about 1.8-million barrels, while distillate stocks rose by about 1.9-million barrels, according to the sources.

Reuters