Oil prices edge lower on prospect of rising US interest rates

Oil prices were also supported by reports that the US Biden administration was considering refilling its strategic oil reserve

Oil prices inched lower on Wednesday on concerns of another US Federal Reserve interest rate hike next week after consumer prices unexpectedly rose in August, outweighing support from a robust OPEC oil demand growth forecast.

Brent crude futures fell 38 cents, or 0.4 per cent, to $92.79 a barrel. US West Texas Intermediate crude was at $87.02 a barrel, down 29 cents, or 0.3 per cent.

Pressuring prices was a hotter-than-expected US inflation report on Tuesday that dashed hopes that the Fed could scale back its rate policy tightening in the coming months. Fed officials are set to meet next Tuesday and Wednesday, with inflation remaining way above the US central bank's 2 per cent target.

"A strong US dollar and an expectation for another super-sized rate hike by the Fed weighed on sentiment, said Tina Teng, an analyst at CMC Markets.

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The dollar climbed close to a 24-year peak against the yen on Wednesday. Oil is generally priced in US dollars, so a stronger greenback makes the commodity more expensive to holders of other currencies.

In China, tough ongoing Covid-19 curbs are squeezing fuel demand at the world's largest oil importer.

"China's zero-Covid policy remains intact and that will keep any rebounds that emerge over the coming weeks capped," said Edward Moya, a senior market analyst at OANDA, in a note.

"The US is the big wildcard and if that demand outlook weakens, oil could resume its downward trajectory that has been in place since the start of the summer."

On the supply side, US crude stocks rose by about 6 million barrels for the week ended September 9, according to market sources citing American Petroleum Institute figures on Wednesday.

The US government will release inventory data at 10:30 am EDT (7:30 pm ist) on Wednesday.

Lending some support to oil prices, the Organisation of the Petroleum Exporting Countries (OPEC) on Tuesday reiterated forecasts for growth in global oil demand in 2022 and 2023, citing signs that major economies were faring better than expected despite headwinds such as surging inflation.

Oil demand will increase by 3.1 million barrels per day (bpd) in 2022 and by 2.7 million bpd in 2023, OPEC said in a monthly report, leaving its forecasts unchanged from last month.