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Ratings agency Fitch on Wednesday downgraded the main U.S.
credit rating, reflecting an expected fiscal deterioration as
well as a high and growing government debt burden. The downgrade
hit investor risk appetite, pushing oil and global stock markets
lower.
"Since oil had a steady rise over the past month, it was ripe
for a pullback. The oil market will remain tight over the short
term, but prices could be still vulnerable for a deeper drop,"
said Edward Moya, an analyst at OANDA.
Brent crude futures were down 81 cents, or 1%, at $82.39 a
barrel at 0812 GMT, while U.S. West Texas Intermediate crude
dropped 73 cents, or 0.9%, to $78.76l.
Both benchmarks hit their highest since April 17 on Wednesday,
but closed down 2% after the ratings downgrade. Some analysts
saw the drop as overdone.
"Oil stocks are still expected to plunge in coming months," said
Tamas Varga of oil broker PVM. "Yesterday's dump bears all the
hallmarks of an overreaction and order ought to be restored in
the near future."
Crude is being supported by concerns of tightening supply
because of output cuts by OPEC+ - the Organization of the
Petroleum Exporting Countries and allies - that are expected to
be kept in place in a meeting on Friday.
Underlining tighter supply, U.S. crude inventories fell by 17
million barrels last week, the largest drop in U.S. crude
inventories according to records dating back to 1982, the Energy
Information Administration said on Wednesday.
Before the OPEC+ meeting, the Bank of England is expected to
raise interest rates to a 15-year high of 5.25% from 5% on
Thursday, as inflation remains the highest of the world's major
economies. The decision is due at 1100 GMT.
(Additional reporting by Andrew Hayley and Sudarshan Varadhan;
Editing by Jan Harvey)
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