Oil prices fell about 1% on Tuesday after the United States said it would release more crude from its Strategic Petroleum Reserve, lifting some supply concerns from the market.
On Monday, the U.S. Department of Energy (DOE) said it would sell 26 million barrels of oil from the SPR, which is already at its lowest level since 1983, a release that had been mandated by Congress in previous years.
The DOE had considered cancelling the annual sale after U.S. President Joe Biden's administration last year sold a record 180 million barrels from the reserve to combat fuel prices that had risen on Russia's war on Ukraine and as global consumers emerged from the COVID-19 pandemic. But that would have required Congress to act to change the mandate.
Brent futures for April delivery fell 96 cents, or 1.1%, to $85.65 a barrel. U.S. West Texas Intermediate crude futures for March fell by 87 cents, or 1.1%, to $79.27 a barrel.
Both benchmarks traded more than $2 lower earlier in the session, but pared some losses after data showed the U.S. consumer price index accelerated at its slowest annual pace since late 2021, raising the likelihood of less aggressive interest rate hikes by the U.S. Federal Reserve.
"The financial markets are still trying to digest the CPI report, with rate hike expectations moving up and down and influencing asset classes such as oil," said UBS analyst Giovanni Staunovo.
"With U.S. equity markets moving up, oil is paring some of its earlier losses," he said.
Oil prices also recovered some losses after the Organization of the Petroleum Exporting Countries raised its 2023 oil demand forecast by 100,000 barrels per day in a monthly report, citing the reopening of the Chinese economy after COVID restrictions.
"OPEC's monthly oil market report yielded some cautious optimism," said Kpler analyst Matt Smith. He added that oil prices remain lower as the markets are entering a risk-off sentiment.
Supply concerns also eased after the U.S. Energy Information Administration said on Monday it expected record March production from the seven biggest U.S. shale basins.
U.S. crude and product inventories were expected to have grown last week, a Reuters poll showed, ahead of industry data due at 4:30 p.m. ET, followed by the EIA's report on Wednesday.