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U.S. crude stocks rose by a more than forecast 10.5 million
barrels, according to market sources citing American Petroleum
Institute (API) figures ahead of official Energy Information
Administration (EIA) data at 1530 GMT.
"Simply put, the U.S. is swimming in oil," said Stephen Brennock
of oil broker PVM.
Brent crude futures fell 45 cents, or 0.5%, to $85.13 a barrel
by 1240 GMT after dropping by more than $1 in earlier trading.
U.S. West Texas Intermediate (WTI) crude slipped 49 cents, or
0.6%, to $78.57.
U.S. inflation data and remarks from central bank officials that
have been perceived as indications that interest rates will go
higher for longer also weighed on the market.
Federal Reserve officials on Tuesday said that the U.S. central
bank will need to maintain gradual increases to interest rates
to beat inflation and suggested that price pressures driven by a
hot jobs market could push borrowing costs higher than
previously expected.
Also applying downward pressure on crude was the announcement
this week that the United States would sell 26 million barrels
of oil from the nation's strategic reserve, which is already at
its lowest level in about four decades.
Lending some support was Wednesday's report from the
International Energy Agency (IEA), which raised its forecast for
2023 oil demand growth and said that restrained OPEC+ production
could bring a supply deficit in the second half.
The IEA said that about 1 million barrels per day (bpd) of
production from OPEC+ member Russia will be shut in by the end
of the first quarter, citing a European ban on seaborne imports
and a G7 price cap over the invasion of Ukraine.
On Tuesday the Organization of the Petroleum Exporting Countries
(OPEC) also raised its projection for global oil demand growth
and pointed to a tighter market in 2023.
(Reporting by Alex LawlerAdditional reporting by Laila Kearney
in New York and Muyu Xu in SingaporeEditing by Bernadette Baum
and David Goodman)
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