Oil prices declined on Wednesday as concerns over slowing global demand combined with rising OPEC+ production weighed on the market, while uncertainty over the US Federal Reserve’s interest rate path added to the cautious sentiment.
Brent crude slipped by 0.17% to $68.17 per barrel, while US West Texas Intermediate (WTI) eased by 0.16% to $65.55 per barrel, extending losses from the previous session.
Data released Wednesday showed that US consumer prices rose 0.3% in June, matching expectations, while annual inflation accelerated to 2.7%, its highest level since February. Core inflation, excluding food and energy, rose 0.2% for the month and 2.9% year-on-year, slightly below forecasts.
The uptick in headline inflation tempered expectations for an interest rate cut by the Fed in September, although markets still anticipate two rate cuts before year-end. Higher US interest rates typically strengthen the dollar, making oil more expensive for holders of other currencies and potentially dampening global demand.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) reported an increase in crude production, adding to supply-side pressures. OPEC’s output rose by 220,000 barrels per day (bpd) in June to 27.23 million bpd, driven primarily by higher production from Saudi Arabia, which increased output by 173,000 bpd to 9.35 million bpd. In contrast, Iran’s production fell by 62,000 bpd to 3.24 million bpd.
Including non-OPEC allies, total OPEC+ production rose by 349,000 bpd in June to 41.56 million bpd, according to the group’s monthly report.
Despite the increase in output, OPEC maintained its forecast for global oil demand growth, projecting a rise of 1.3 million bpd in 2025 to 105.13 million bpd, with most of the growth expected from non-OECD countries.
Adding to bearish sentiment, the American Petroleum Institute reported an unexpected surge in US crude inventories, which rose by 19.1 million barrels last week against expectations of a 2 million-barrel drawdown. The unexpected buildup raised concerns about weakening demand in the world’s largest oil-consuming nation.
Investors now await official US inventory data from the Energy Information Administration for further direction on market fundamentals.
With steady demand projections amid rising supply and signs of softening consumption in key markets, concerns over a potential oversupply in the second half of the year continue to pressure oil prices.
