Investing.com– Oil prices fell sharply in Asian trade on Wednesday, extending recent losses as signs of an unexpected build in U.S. stockpiles and strong crude production sparked doubts over tight supply conditions.
Markets were also on edge before the conclusion of a Federal Reserve meeting later in the day, where the central bank is widely expected to strike a hawkish note. The shot up this week in anticipation of the Fed, also pressuring oil prices.
expiring in July fell 0.9% to $85.58 a barrel, while fell 1% to $80.48 a barrel by 21:02 ET (01:02 GMT).
Oil prices were also nursing losses in recent sessions amid growing speculation over an Israel-Hamas ceasefire, although no such agreement was reached so far.
Oil prices dented by U.S. inventory build, strong output
Data from the American Petroleum Institute showed on late-Tuesday that U.S. grew by 4.9 million barrels in the week to April 26, ducking expectations for an increase of 1.5 million barrels.
While gasoline and distillate stockpiles shrank, the rise in overall inventories suggested that oil supplies were not as tight as initially expected in the world’s biggest fuel consumer.
This notion was reinforced by separate data showing U.S. domestic crude output rose to 13.15 million barrels per day in February from 12.58 million barrels in January, its biggest jump since October. The rise also saw U.S. production come back in sight of record highs.
This spurred doubts over just how tight global crude markets would be in the coming months, given that U.S. output remains robust and the country’s oil markets remain well supplied.
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A potential ceasefire between Israel and Hamas could also further downplay expectations of tighter markets, especially amid lower risks of supply disruptions in the Middle East.
The API data usually heralds a similar trend from , which is due later on Wednesday.
Fed fears in play, dollar strength weighs
Markets were also on edge before the conclusion of a two-day Fed meeting later in the day. While the central bank is widely expected to , Fed Chair Jerome Powell is likely to strike a hawkish note following a series of strong inflation readings.
Expectations of higher-for-longer U.S. interest rates saw the dollar rise sharply this week, which also weighed on oil prices.