Oil News: Demand Concerns Mount Amid Hawkish Fed and Supply Glut

Crude Oil Trades Lower as Rising US Inventories and Hawkish Fed Pressure Market

Light crude oil futures are trading lower on Wednesday, threatening to end a three-day short-covering rally. The pullback raises the possibility of a test of key technical support at the 50% retracement level of $72.42. If this level fails, traders may look toward the 50-day moving average at $71.37, the 200-day moving average at $70.72, and the Fibonacci level at $70.38 as the next downside targets.

On the upside, the next major resistance stands at the 50% level of $74.94. A break below $70.38 could leave the market vulnerable to further selling pressure.

At 10:38 GMT, Light Crude Oil futures are trading $72.53, down $0.79 or -1.08%.

US Crude Stockpile Build Fuels Bearish Sentiment

Oil prices are down 1% on Wednesday as traders react to reports of a sharp rise in U.S. crude inventories. The American Petroleum Institute (API) estimated a 9.4 million-barrel build for the week ending February 7, raising concerns about oversupply. Gasoline inventories fell by 2.51 million barrels, while distillate stocks dropped by 590,000 barrels.

Market participants are now awaiting the official Energy Information Administration (EIA) report for confirmation. If the large crude build materializes, prices could face additional downside pressure, particularly if refinery maintenance and weather-related disruptions continue affecting crude flows.

Hawkish Fed Commentary Weighs on Oil Demand Outlook

Federal Reserve Chair Jerome Powell’s latest comments reinforced a cautious economic outlook. Powell signaled that the Fed is not in a hurry to cut interest rates, keeping borrowing costs elevated. Higher rates typically slow economic activity, reducing oil demand.

Traders are closely monitoring Wednesday’s U.S. consumer price index (CPI) data, expected to show core inflation easing slightly to 3.1% year-over-year, with headline inflation holding steady at 2.9%. A stronger-than-expected reading could reinforce the Fed’s hawkish stance, dampening sentiment in the oil market.

EIA Raises US Crude Production Forecast

Adding to supply concerns, the EIA raised its U.S. crude production estimate, now projecting output to reach 13.59 million barrels per day in 2025. Demand forecasts were left unchanged, suggesting that increased production could weigh on prices if global consumption fails to keep pace.

Market Outlook: Bearish Risks Grow as Oil Tests Key Support

With rising crude inventories, a cautious Fed, and increasing U.S. production, oil prices face mounting downside risks. WTI crude is currently testing critical support levels, and a break below $70.38 could accelerate selling pressure. Traders are watching the EIA report and CPI data for further market direction, with sentiment leaning bearish unless a fresh bullish catalyst emerges.

More Information in our Economic Calendar.