MELBOURNE (Reuters) – Oil prices fell for a second day on Wednesday amid the potential for Iranian supply to return and as investors sold on speculation that inflation fears could lead the US Federal Reserve to raise interest rates, which could limit economic growth.
U.S. West Texas Intermediate (WTI) crude futures fell 73 cents, or 1.1%, to $ 64.76 a barrel at 0241 GMT, after falling 1.2% on Tuesday.
Brent futures also fell 73 cents, or 1.1%, to $ 67.98 a barrel, after falling 1.1% on Tuesday.
“There is a larger risk reduction game going on,” said Justin Smirk, senior economist at Westpac, after falling oil prices and falling stock markets as investors sold more speculative assets .
Smirk said speculation that the Federal Reserve might raise rates due to inflation fears has weighed on growth prospects and, in turn, on demand for commodities.
“The Fed is very serious (about keeping rates low), but the market is speculating on an earlier move,” he said.
The Fed has indicated that interest rates will remain at their current lows until 2023, although futures markets show investors believe rates could start rising by September 2022.
Oil prices were also under pressure amid reported progress in negotiations between the United States and Iran to revive an agreement limiting its nuclear program, which could lead to a lifting of sanctions and a resurgence of exports of Iran. Iranian oil.
“In the most bearish case of oil prices, around 1.5% of the world’s oil supply could be up and running in less than 6 months. We believe any increase in Iranian oil supply is likely to be more gradual, ”Commonwealth Bank commodities analyst Vivek Dhar said in a note.
Investors will be on the lookout for the latest data on US crude and commodities inventories from the US Energy Information Administration, due Wednesday.
Data from the American Petroleum Institute on Tuesday showed crude inventories increased by 620,000 barrels during the week ended May 14, while gasoline inventories fell by 2.8 million barrels and Distillate inventories fell 2.6 million barrels, according to two market sources.
The rise in crude inventories was smaller than the 1.6 million barrels increase that analysts estimated, on average, in a Reuters poll, while the drops in gasoline and distillate inventories were larger than planned.
Reporting by Sonali Paul; Editing by Christian Schmollinger