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Oil prices held on to most of the previous day’s gains in early trade on Thursday as markets weighed an unexpected draw in U.S. crude oil stocks against the prospect of weaker demand after the Federal Reserve chairman hinted at further interest rate hikes.
Brent futures slipped 8 cents, or 0.1%, to $77.04 a barrel, while U.S. West Texas Intermediate (WTI) crude futures were down 5 cents, or 0.1%, at $72.48 at 0015 GMT.
The benchmarks had gained a dollar a barrel in the previous session as U.S. corn and soybean prices raced to multi-month highs, raising expectations that crop shortfalls around the globe could lower biofuels blending and increase oil demand.
Supporting the market, U.S. crude oil inventories fell by about 1.2 million barrels in the week ended June 16, sources said citing data from the American Petroleum Institute, an industry group, defying analysts’ forecasts for a build of 300,000 barrels.
Official inventory data from the U.S. Energy Information Administration is due later on Thursday. The report was delayed by a day following the Juneteenth public holiday on Monday.
Meanwhile, Fed Chair Jerome Powell in congressional testimony reinforced that the central bank’s objective was to rein in inflation and said two more 25-basis point rate hikes by year end was “a pretty good guess.”
Higher interest rates ultimately increase borrowing costs for consumers, which could slow economic growth and reduce oil demand.
The dollar also ticked up against a basket of currencies on Powell’s comments. A firmer dollar weighs on oil demand as it makes the commodity more expensive for buyers holding other currencies.
However, oil prices could rise as muted increases in U.S. oil production and cuts by the OPEC+ producing-nations group will limit crude supply in the months ahead, an executive at U.S. shale producer EOG Resources said on Wednesday.
