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Brent futures settled down $2.98, or 3.9%, to $74.14 a barrel.
U.S. West Texas Intermediate (WTI) crude futures were down
$3.02, or 4.2%, at $69.51.
The benchmarks erased gains from the previous session, during
which U.S. corn and soybean prices raced to multi-month highs,
raising expectations that crop shortfalls could lower biofuels
blending and increase oil demand.
The Bank of England raised interest rates by a
bigger-than-expected half a percentage point to fight stubborn
inflation. It was the central bank's 13th straight rate hike.
Higher interest rates could slow economic growth and reduce oil
demand.
Feeding caution, U.S. Federal Reserve Chair Jerome Powell said
two more rate hikes of 25 basis points each by the end of the
year was "a pretty good guess."
"We're locked in a trading range but prices are held back by the
concerns about the economy, the larger economy," said Phil
Flynn, an analyst at Price Futures Group.
Equities, which often move in tandem with oil, were also down. [MKTS/GLOB]
In supply, U.S. crude inventories fell by 3.8 million barrels in
the last week to 463.3 million barrels, compared with analysts'
expectations in a Reuters poll for a 300,000-barrel rise.
U.S. gasoline stocks rose by about 480,000 barrels in the week
to 221.4 million barrels, the Energy Information Administration
(EIA) said, compared with analysts' expectations in a Reuters
poll for a 100,000-barrel rise.
Distillate stockpiles, which include diesel and heating oil,
rose by about 430,000 barrels in the week to 114.3 million
barrels, versus expectations for a 700,000-barrel rise, the EIA
data showed.
"Given the decline in crude oil and the very modest increases in
refined products inventories, I would have thought we would get
a better response from the market, but the crude oil and refined
product market is simply being weighed down by higher interest
rates," said Andrew Lipow, president of Lipow Oil Associates in
Houston.
Investors are now awaiting Chinese factory activity data due
next week, which could indicate the strength of China's economy.
An executive at U.S. shale producer EOG Resources said oil
prices could rise as muted increases in U.S. oil production and
cuts by OPEC+ producers will limit supply in the months ahead.
(Reporting by Stephanie Kelly; additional reporting by Shadia
Nasralla and Jeslyn LerhEditing by Conor Humphries, Mark Potter
and David Gregorio)
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