By Ambar Warrick
Investing.com-- Oil prices fell further on Thursday amid growing concerns over a slowdown in global economic growth, with focus now turning to upcoming U.S. inflation data that is expected to set the tone for monetary policy in the coming months.
Crude prices fell sharply this week as data showed U.S. crude oil inventories grew thrice as much as expected in the past week, although a bulk of this was driven by a roughly 3.5 million barrel drawdown from the Strategic Petroleum Reserve (SPR).
Investors are now uncertain over future drawdowns from the SPR, given that the reserve is currently at 40-year lows, and that the U.S. midterm elections were seen as a major driver of the move.
But a smaller than-expected drawdown in gasoline inventories drove some concerns over U.S. fuel demand.
Brent oil futures fell slightly to $92.41 in early Asian trade, while West Texas Intermediate crude futures fell 0.3% to $85.61 a barrel. Both contracts are trading down 7.4% and 6% for the week, respectively.
A raft of weak economic data from China pointed to sluggish growth in the world’s largest oil consumer. The country’s trade balance grew less than expected in October, while inflation eased further due to continued disruptions from COVID-19 lockdowns.
Strength in the dollar, which recovered from recent losses on Wednesday, also weighed on crude prices. Rising U.S. interest rates and a stronger dollar were among the biggest weights on oil prices this year, as commodities priced in the greenback grew more expensive.
Focus is now on key U.S. CPI inflation data due later in the day, which is expected to show that price pressures remained elevated through October. A strong inflation reading could attract more monetary tightening measures by the Federal Reserve, a scenario that is negative for oil.
Still, several Fed members are calling for a smaller interest rate hike in December, which could dent the dollar and ease near-term pressure on crude markets.
Oil prices are expected to rise towards the end of the year, as a supply cut by the Organization of Petroleum Exporting Countries takes effect. The cartel also vowed to keep prices supported with more supply cuts if needed.
Western bans on Russian oil exports are also expected to tighten crude markets in the coming months, which is likely to benefit prices.