Oil prices retreated on Thursday after rising for two sessions, with investors still showing lingering concern over a possible U.S. recession and weaker oil demand.
Brent crude fell 32 cents to $87.01 a barrel while U.S. West Texas Intermediate slid 22 cents, to $83.04.
Both benchmarks rose 2% on Wednesday to their highest in more than a month as cooling U.S. inflation data spurred hopes the Federal Reserve is likely to stop hiking interest rates.
Previous tightening, however, which has lifted interest rates to their highest since 2007, raised concerns that the Fed’s focus on halting inflation might throttle economic growth and future oil demand in the world’s biggest oil user.
The U.S. Consumer Price Index (CPI) climbed 0.1% last month, below economists’ expectations for a 0.2% gain, and down from a 0.4% increase in February, raising expectations the Fed is likely to stop hiking rates after a possible increase in May.
The Fed’s staff assessing the potential fallout of banking stress projected a “mild recession” later this year.
Markets on Wednesday shrugged off a small build in U.S. crude oil stocks, attributing it in part to a congressionally-mandated release of oil from the U.S. emergency reserve and lower exports at the start of the month.
Crude inventories rose by 597,000 barrels last week, the Energy Information Administration said on Wednesday, compared with analysts’ expectations in a Reuters poll for a 600,000-barrel drop. Gasoline and distillate stocks, meanwhile, were drawn down less than expected.
The Biden administration plans to refill the U.S. Strategic Petroleum Reserve soon, and hopes to do it at lower oil prices, U.S. Energy Secretary Jennifer Granholm said on Wednesday.
Still, the oil market was jolted higher two weeks ago after the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia agreed to curtail output.
As a result, the global oil market could see tightness in the second half of 2023, which would push prices higher, said Fatih Birol, executive director of the International Energy Agency.
