(Bloomberg) -- Oil fell as an industry estimate pointed to another major build in American inventories and the dollar gained, with investors assessing the outlook for even tighter US monetary policy to combat sticky inflation.
West Texas Intermediate fell below $78 a barrel after ending 1.4% lower on Tuesday. The industry-funded American Petroleum Institute reported that US commercial crude inventories rose by 10.5 million barrels last week, according to people familiar with the figures. That compares with a 2-million-barrel rise forecast in a Bloomberg survey. Official data come later Wednesday.
Investors are trying to work out how much higher the Federal Reserve will push interest rates to quell price gains. Consumer prices rose 0.5% in January, the most in three months, and annual inflation came in higher-than-expected.
Oil has struggled this week despite Russia’s plan to reduce supplies as sanctions bite amid the war in Ukraine, and a host of signs that China’s refiners are scooping up cargoes as activity picks up. A US plan for a mandated sale of barrels from the Strategic Petroleum Reserve has weighed on prices, which have also been burdened by expectations for higher US interest rates and a stronger dollar, which reduces the appeal of commodities such as oil.
“The direction of travel in the near term looks more south than north,” said Vishnu Varathan, head of Asia economics and strategy at Mizuho Bank Ltd., citing factors including more elevated interest-rate expectations. In addition, given the inventory build, there could be a softening bias, he said.
US crude stockpiles have swelled this year to hit the highest level since mid-2021 after expanding for seven straight weeks. Stockpiles of gasoline and distillates also rose last week, according to the API estimates.
The Paris-based International Energy Agency, which advises rich nations on policy, is due to issue its monthly market snapshot later Wednesday, offering traders fresh insights into supply-and-demand trends over 2023. On Tuesday, the Organization of Petroleum Exporting Countries said that it expected a slightly tighter global oil market than it had previously forecast.
