Crude Oil Falls 2% On Powell’s Comments, Prospected Supply

After hitting seven-week highs, crude oil prices fell after Fed Chair Jerome Powell warned the US economy could be hurt by attempts to reduce inflation. Crude oil prices also retreated 2% on Tuesday as the United States decided to ease restrictions on Venezuela, the news has raised hopes that the market will receive additional oil supplies.

For the first time since May 2020, the Brent crude settled below US West Texas Intermediate crude. Refiners worldwide scrambled to find alternative energy supplies after Russia’s invasion of Ukraine. US reserves are falling and that has raised the price for US-based crudes. Brent crude fell $2.31, or 2%, to settle at $111.93 a barrel, and US West Texas Intermediate (WTI) crude fell $1.8, or 1.6%, to settle at $112.40 a barrel.

Powell suggested there could be some economic pain involved in bringing inflation down. The US central bank will keep pushing” to tighten US monetary policy until it is clear that inflation is declining. Some comments tempered buying enthusiasm on the oil side.

Oil prices have generally been rising as Russian supply is squeezed by bans from several countries and an economic downturn due to broad sanctions on Moscow imposed by the United States and allies. Russia’s production dropped by 9% in April, and the country, part of the OPEC+ group, produced far below levels required under a deal to gradually ease record output cuts made during the worst of the pandemic in 2020.

US President Joe Biden’s administration will authorize US oil company Chevron Corp (CVX.N) to negotiate with Venezuelan President Nicolas Maduro’s government as soon as Tuesday. There is no final US decision yet on renewing Chevron’s current limited license to operate in Venezuela.


This month, non-Russian deliveries into the Polish port of Gdansk hit the highest in at least seven years, as refiners in eastern Germany and Poland switched. Unless OPEC and its allies ramp up production and fast, it is difficult to see how prices can go down meaningfully.

EU foreign ministers failed on Monday in their effort to pressure Hungary to lift its veto on the proposed oil embargo. But some diplomats now point to a May 30-31 summit as the moment for agreement on a phased ban on Russian oil. US crude and gasoline stocks fell last week according to data released by the American Petroleum Institute on Tuesday. Market participants, traders and investors are awaiting US government data is due on Wednesday.