Oil edged up on Wednesday, a day after prices fell through $100 a barrel for the first time since April, but gains were limited by caution ahead of U.S. inflation data that could weaken the market. Brent crude futures were up 45 cents, or 0.5 percent, at $99.97 a barrel. U.S. West Texas Intermediate crude gained 44 cents, or 0.5 percent, to $95.27.
A further concern is that U.S. interest rate rises will push up the dollar, also undermining oil prices.“Persisting recession fears continue to hit the market, whilst the strength of the USD and burst up in Covid cases in parts of China is certainly not helping,” said Warren Patterson, head of commodities strategy at ING. Investors have sold oil positions on worries that aggressive interest rate hikes to stem inflation will sharply slow economic activity and hit oil demand. Prices fell by more than 7 percent on Tuesday in volatile trading.
Oil is generally priced in U.S. dollars, so a stronger greenback makes the commodity more expensive to holders of other currencies, putting downward pressure on demand. Economists polled by Reuters expect the figures to show that U.S. inflation has advanced, to 1.1 percent monthly and 8.8 percent annually.
Wednesday’s U.S. crude supply data from the U.S. Energy Information Administration showed a build of 3.254 million barrels for the week ended July 8. Crude supply data from the American Petroleum Institute released the day before, showed a build of 4.762 million barrels.