Oil holds loss on jump in US stockpiles, Fed rate-hike signal

Oil held losses driven by a big jump in US crude stockpiles and as the Federal Reserve signaled it’s not finished with rate hikes.

West Texas Intermediate futures traded near $68 a barrel on Thursday after falling 1.7% in the previous session. US nationwide inventories rose by the most in four months, according to government data, while stockpiles at the key storage hub in Cushing, Oklahoma, swelled to a two-year high.

Fed officials paused their series of interest-rate hikes but projected borrowing costs will go higher than previously expected to tame what Chair Jerome Powell called surprising persistent inflation. There’s renewed worries the central bank will steer the US economy into a recession.

Crude in New York has lost 15% this year amid concerns of a US slowdown and a lackluster rebound in China’s economy, although futures have traded in a narrow range since early May. The Asian nation’s apparent oil demand rose 17% last month from a year ago, while industrial output also edged higher, according to official data released on Thursday.

“Oil prices have a conspiracy of dampeners with inventory builds on the supply side being exacerbated by softer demand risks from the Fed,” said Vishnu Varathan, the Asia head of economics and strategy at Mizuho Bank Ltd. in Singapore. That’s against a backdrop of a sluggish recovery in China, he added.

While there have been some bright spots for demand, the generally dour outlook has left Wall Street abandoning predictions for a sharply price rally this year. JPMorgan Chase & Co. on Wednesday became the last of the major banks to slash crude price forecasts.

US crude stockpiles rose by 7.9 million barrels last week, while gasoline and distillates inventories also expanded, according to the Energy Information Administration. That’s a bearish signal as the US driving season gets underway.

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