Oil Prices Decline as U.S. Crude Stockpiles Rise and Powell Signals Cautious Rate Cuts

Oil prices fell on Wednesday, ending a three-day winning streak, as data showed a sharp rise in U.S. crude inventories and Federal Reserve Chair Jerome Powell indicated that interest rate cuts would not come quickly this year.

As of 12:30 GMT, Brent crude declined by 77 cents, or 1%, to $76.23 per barrel, while West Texas Intermediate (WTI) crude dropped 88 cents, or 1.2%, to $72.44 per barrel. The decline follows a period of gains, during which Brent rose 3.6% and WTI climbed 3.7% over three consecutive sessions.

Federal Reserve Policy and Oil Demand

Investor sentiment was affected by Powell’s testimony before the U.S. Senate on Tuesday, in which he emphasized that the central bank was in no rush to cut interest rates. Powell reiterated that the U.S. economy remained strong and that the Federal Reserve would only consider reducing rates if inflation declines further or if the labor market weakens. Higher interest rates generally lead to increased borrowing costs, which can slow economic growth and reduce demand for oil.

Surge in U.S. Crude Inventories

Adding to bearish market sentiment, data from the American Petroleum Institute (API) revealed that U.S. crude oil stockpiles surged by 9.4 million barrels in the week ending February 7. The report also showed a decline in gasoline inventories by 2.51 million barrels and a drop in distillate stocks by 590,000 barrels. Traders are awaiting official inventory data from the Energy Information Administration (EIA), which is set to be released later on Wednesday and could further influence market direction.

U.S. Crude Production Outlook

In its latest forecast, the EIA raised its estimate for U.S. crude oil production in 2025, expecting output to reach 13.59 million barrels per day (bpd), up from its previous projection of 13.55 million bpd. This upward revision signals continued strong supply, which could weigh on prices if demand fails to keep pace.

Inflation Data in Focus

Market participants are also closely watching the upcoming U.S. Consumer Price Index (CPI) report, scheduled for release at 13:30 GMT. The data will provide insights into inflation trends and could influence Federal Reserve policy decisions. Economists expect core inflation, which excludes volatile food and fuel prices, to slow slightly to 3.1% year-on-year from 3.2%, while headline inflation is projected to remain steady at 2.9%.

The outcome of the inflation report could have significant implications for interest rates and, in turn, oil demand. A higher-than-expected inflation reading may reinforce the Federal Reserve’s cautious stance on rate cuts, potentially limiting economic activity and energy consumption.