(Bloomberg) -- Oil fluctuated near $96 a barrel as sizzling US inflation data raised the prospect of more aggressive interest rate hikes, while high gasoline prices are starting to taking their toll on consumption.
West Texas Intermediate futures closed marginally higher on Wednesday after a volatile session that saw prices hit a three-month low at one point. US inflation soared to a fresh four-decade high last month, reflecting higher costs including gasoline. Demand for the motor fuel plunged last week to the lowest seasonal level since 1996, according to the Energy Information Administration.
Escalating concerns over an economic slowdown have wiped out most of the gains seen after Russia’s invasion of Ukraine, which drove prices above $130 a barrel in March. The turmoil has overshadowed a squeeze of physical crude markets, which Goldman Sachs Group Inc. says are “very tight.”
US President Joe Biden is touring the Middle East this week and is scheduled to visit Saudi Arabia. Biden has repeatedly called on OPEC to pump more, and the kingdom along with the United Arab Emirates are the only cartel members with significant volumes of unused production capacity.
“Demand is starting to show some weakness,” said Gao Jian, a Shandong-based analyst with Zhaojin Futures Co. “The market is paying high attention to the Biden visit. Any supply increase news could drive prices lower.”
US crude stockpiles rose by 3.25 million barrels last week, according to the EIA. Inventories at the key storage hub at Cushing, Oklahoma, expanded for a second week to 21.6 million barrels.
Renewed Covid-19 outbreaks in China have also weighed on the outlook for oil demand. Shanghai’s flareup appears to be easing, but other regions are being locked down and facing restrictions to curb the spread of the virus. Nationwide, 292 cases were recorded on Wednesday.