By Scott DiSavino
NEW YORK (Reuters) -Oil prices slid about 2% to a one-week low on Wednesday on a much bigger-than-expected U.S. crude stock build and expectations of further interest rate hikes, though forecasts for higher 2023 demand growth limited losses.
U.S. crude stockpiles jumped by 16.3 million barrels last week to 471.4 million barrels, their highest since June 2021, the U.S. Energy Information Administration (EIA) said.
That was much higher than the 1.2 million-barrel increase that analysts forecast in a Reuters poll and compares and the 10.5 million-barrel increase shown in data from the American Petroleum Institute (API), an industry trade group. [EIA/S] [API/S]
Analysts said an unusually large crude oil supply adjustment in the EIA data contributed to the outsized build.
“It’s the worst kind of build that you can possibly have. It’s all about the …. adjustment number. There’s no getting around that,” said Bob Yawger, director of energy futures at Mizuho, a bank.
Brent futures fell $1.35, or 1.6%, to $84.23 a barrel by 11:11 a.m. EST (1611 GMT), while U.S. West Texas Intermediate crude (WTI) fell $1.46, or 1.9%, to $77.60.
That puts both Brent and WTI on track for their lowest closes since Feb. 7.
U.S. inflation data and remarks by central bank officials that have been perceived as indications that interest rates will go higher for longer also weighed on the market.
Federal Reserve officials on Tuesday said that the U.S. central bank will need to maintain gradual increases to interest rates to beat inflation and suggested that price pressures driven by a hot jobs market could push borrowing costs higher than previously expected.
Also applying downward pressure on crude was the announcement this week that the United States would sell 26 million barrels of oil from the nation’s strategic reserve, which is already at its lowest level in about four decades.
Lending some support was Wednesday’s report from the International Energy Agency (IEA), which raised its forecast for 2023 oil demand growth and said that restrained OPEC+ production could bring a supply deficit in the second half.
OPEC+ includes the Organization of the Petroleum Exporting Countries (OPEC) and other oil suppliers including Russia.
The IEA said that about 1 million barrels per day (bpd) of production from OPEC+ member Russia will be shut in by the end of the first quarter, citing a European ban on seaborne imports and a Group of Seven (G7) price cap over the invasion of Ukraine.
The G7 is a group of seven countries, including Canada, France, Germany, Italy, Japan, Britain and the United States.
On Tuesday OPEC also raised its projection for global oil demand growth and pointed to a tighter market in 2023.
(Additional reporting by Alex Lawler in London, Laila Kearney in New York and Muyu Xu in Singapore; Editing by Marguerita Choy and Mike Harrison)