By Adedapo Adesanya
Oil prices continued plummetting on Wednesday following a surprise inventory build and uncertainty about interest rate cuts in the United States and the future of oil demand growth.
Data showed that Brent crude traded at $83.90 per barrel after losing 2.81 per cent or $2.43 as the US West Texas Intermediate (WTI) finished at $79.44 per barrel after depreciating by 3.04 per cent or $2.49.
Earlier on Wednesday, the Energy Information Administration (EIA) released US inventory data, showing a surprise build in crude stockpiles of 7.3 million barrels for the week to April 26, compared with a substantial draw of 6.4 million barrels for the previous week that pushed prices temporarily higher last week.
Those are the highest inventory levels since June 2023.
In contrast, the American Petroleum Institute (API) on Tuesday announced a 4.9 million barrel build.
Data recently has demonstrated that inflation is proving stubborn, consumer confidence is falling and the US economy is growing more slowly than expected. This had earlier suggested that the Federal Reserve will keep interest rates steady, with hoped-for rate cuts looking further away now.
It came as no surprise on Wednesday when the US Federal Reserve held interest rates steady and signalled it is still leaning towards eventual reductions in borrowing costs.
The US central bank chairman, Mr Jerome Powell said it was likely to take longer than previously expected for officials to gain the “greater confidence” needed to kick off interest rate cuts.
The benchmark policy rate has been held in the current 5.25 per cent -5.50 per cent range since July. Rate cuts had been anticipated as early as March of this year, but have been pushed back as incoming inflation data showed that progress towards the 2 per cent target had stalled. The personal consumption expenditures price index, which is the Fed’s preferred inflation gauge, increased 2.7 per cent in March on a year-over-year basis.
Also weighing on oil prices was the re-emergence of the on-again-off-again prospect of a ceasefire in the Middle East.
The US and its partners continue to push for a cease-fire in Gaza with an Israeli delegation present in Cairo where negotiations are taking place.
A Hamas delegation was in Cairo on Monday to discuss a proposal to release 33 hostages in exchange for a cease-fire and the release of Palestinian prisoners.