The hawkish Fed outlook and the increase in US inventories weigh on crude oil

In response to the increase in US crude oil inventories shown in the latest US statistics, crude oil futures prices fell for 3 consecutive transactions on Wednesday, and concerns about demand increased as the Federal Reserve Board meeting summary showed that there is a possibility that inflation will take longer than expected to calm down.

In the summary of proceedings, it was also indicated that “various participants stated that they are prepared to further tighten policies if the risk of inflation becomes apparent and such measures become appropriate.”

Nimex crude oil (CL1: COM) in the month before the July delivery ended at -1.4% at $77.57 per barrel, making it the lowest liquidation value since 3/12. Brent crude oil (CO1:COM) closed at -1.2% per barrel in July last month at $81.90. It was the worst level since February 23.

The energy (NYSEARCA: XLE) sector is at the bottom of this week's leaderboard and is down 3% since Friday compared to the S&P 500's slight increase since the beginning of the week.

According to the Energy Information Administration's weekly petroleum statistics, US commercial crude oil inventories increased by 1.8 million barrels in the week ending 5/17, which was compared to the consensus forecast of a further decline in response to a weekly draw.

Mizuho analyst Robert Yoger pointed out that US production volume did not change, and net imports declined while refinery operations increased, and since the adjustment coefficient in the report rose to the highest value since November, traders treated this construction with some skepticism.

However, Mizuho stated that while demand increased to 9.3 million barrels per day, the fact that gasoline stocks declined by 945,000 barrels was a positive aspect of the “Today Saved” report from the extremely important Memorial Day weekend to the summer driving season.

Meanwhile, the crude oil spot market is softening, and as another sign that concerns about tight immediate supply are easing, Brent crude oil's premium for two-month first-month contracts is at a level close to the lowest level since January.

Tamas Varga, an analyst at oil broker PVM, told Reuters that “views on the fundamental outlook remain tough.”