Oil prices were little changed on Wednesday, rebounding from the previous session’s lows on signs of easing inflation in the United States (US), the world’s largest oil-consuming country, while the market remained overly cautious ahead of meetings of the Organization of Petroleum Exporting Countries and Allies (OPEC+) and the United States Federal Reserve (Fed).
Brent crude sold at $85.52 per barrel, a 0.07% gain over the previous trading session’s closing price of $85.46 per barrel. At the same time, the American benchmark West Texas Intermediate (WTI) traded at $79.03 per barrel, up 0.20% from the previous session’s closing of $78.87 per barrel.
According to Commerce Department numbers released this week, prices climbed marginally as the Fed’s favored inflation gauge slowed yearly to a 4.4% gain in December 2022, down from a 4.7% increase in November.
The year-on-year decline is due to the Fed’s vigorous monetary tightening cycle and interest rate rises last year. The US Federal Reserve raised interest rates by 425 basis points on seven occasions last year to combat record-high inflation, which is expected to reach its highest level in almost 40 years by mid-2022.
The Fed’s first two-day meeting in 2023 concludes on Wednesday, with a 25-basis-point rate raise largely forecast.
The IMF’s negative economic forecasts have a negative impact on pricing.
Markets were also paying attention to the OPEC+ Joint Ministerial Monitoring Committee (JMMC) meeting later on Wednesday. The International Monetary Fund’s bleak economic forecasts prevented price hikes. The IMF has raised its forecast for the global economy in 2023, but it still expects a recession this year followed by a comeback in 2024.
According to an IMF assessment issued late Monday, global GDP growth rates will remain poor due to the ongoing Russia-Ukraine conflict and high inflation statistics.
The world economy is expected to grow 2.9% in 2023, upgraded from 2.7% in the IMF’s October report, but down from 3.4% expansion for 2022. Estimates of a massive rise in the US crude oil stockpiles also exerted downward pressure on prices.
Late Tuesday, the American Petroleum Institute (API) announced its estimate of a rise of nearly 6.3 million barrels in US crude oil inventories relative to the market expectation of a 1 million barrels fall.
Leading to investor caution, the new projected massive increase in crude stocks signalled falling crude demand in the US, the world’s largest oil consumer, and weighed on oil prices.
