Oil prices slide on signs of bumper build in US inventories

US oil inventories surge 9.3 mln barrels- API

Data from the American Petroleum Institute showed that U.S. crude inventories saw a build of 9.3 million barrels in the week to March 22, compared to a drop of 1.5 million barrels in the prior week. The reading was substantially above expectations for a draw of 1.2 million barrels. 

API data usually heralds a similar trend in official U.S. inventory data, which is due later on Wednesday. But the API reading raised questions over just how tight U.S. crude markets were, especially as oil production remained at record highs of over 13 million barrels per day. 

“In addition, the API reported that Cushing crude oil stocks increased by 2.4 million barrels. If confirmed by the more widely followed Energy Information Administration report, this would be the biggest weekly gain since January 2023,” analysts at ING said, in a note.

Expectations of tighter global oil supplies- following Russian supply curbs, geopolitical disruptions in the Middle East and increased U.S. refinery activity- powered oil prices to four-month highs earlier in March. 

But this also set up crude for some profit-taking, especially in the wake of data potentially questioning the narrative of tight markets.

Dollar weighs ahead of PCE data, Fed speakers 

Strength in the dollar, which hovered near one-month highs, also weighed on oil prices, especially as traders pivoted into the greenback ahead of more cues on U.S. inflation and interest rates later this week.

PCE price index data- the Federal Reserve’s preferred inflation gauge, is due on Friday and is widely expected to factor into the central bank’s outlook on interest rate cuts. 

Along with the PCE data, addresses from major Fed officials- Chair Jerome Powell and FOMC member Mary Daly- are also due on Friday. 

Ahead of them, Federal Reserve Board Governor Christopher Waller is due to speak later Wednesday, and his comments will be studied as they could potentially offer up more cues on interest rates. 

OPEC+ meets next week 

The Organization of the Petroleum Exporting Countries and allies led by Russia, a group known as OPEC+, is set to meet next week to review the market and the extent to which members are implementing the agreed output cuts.

However, the group is unlikely to make any oil output policy changes until a full ministerial gathering in June, Reuters reported, citing sources.

OPEC+ agreed earlier this month to extend output cuts of about 2.2 million barrels per day to the end of June, although there has been uncertainity over whether all members have fully complied with their agreed production levels.