Oil prices fell by more than a dollar a barrel on Wednesday, ending a three-day rally, as economic data suggested that the U.S. Federal Reserve might hike interest rates further.
Brent crude crude dropped $1.03, or 1.3%, to settle at $76.41 a barrel while U.S. West Texas Intermediate crude (WTI) fell $1.15, or 1.6%, to $72.56 a barrel.
U.S. consumer prices rose in April, potentially raising the likelihood that the Fed will maintain higher interest rates for the time being. Rising global interest rates have weighed on oil prices in recent months, as traders are concerned about the economy crashing into a recession.
"Oil prices have been depressed by fears about economic growth related to the banking crisis and normal seasonal weakness during the spring as energy demand moderates," said Jay Hatfield, CEO of Infrastructure Capital Management.
U.S. crude oil inventories rose by about 3 million barrels last week due to another release from national reserves and a drop in exports, the Energy Information Administration said.
The government report confirmed industry data released late Tuesday that had reported an unexpected build, which weighed on prices for most of Wednesday's session. [API/S}
Analysts polled by Reuters had forecast a crude drawdown of 900,000 barrels.
The surprising U.S. crude inventory build, along with lower crude imports and April's softer export growth in China exacerbated worries about global oil demand.
The decline in crude prices was, however, limited by a surge in U.S. gasoline demand ahead of the summer driving season.
U.S. gasoline inventories decreased by 3.2 million barrels last week, much bigger than the 1.2 million-barrel draw forecast by analysts. Distillate stocks also declined, EIA data showed.
RBOB gasoline futures rose 0.7% to $2.50 per gallon, while the ULSD futures contract was trading about unchanged.
"We are forecasting that oil prices range from $75-95 during 2023 based on fundamental supply and demand and that oil will rally as we head into the summer driving season," Hatfield said.