By Adedapo Adesanya
Brent crude dropped about 2.52 per cent or $2.82 on Wednesday to $109.1 per barrel amid a drop in global stock markets despite the United States Energy Information Administration (EIA) reporting an inventory draw of 3.4 million barrels.
In the same vein, the price of the US West Texas Intermediate (WTI) depreciated yesterday by 44 cents or 0.4 per cent to settle at $109.2 per barrel.
At 420.8 million barrels, the EIA said inventories of crude oil were 14 per cent below the five-year average for this time of the year.
A week earlier, crude oil inventories added a substantial 8.5 million barrels, weighing on oil prices temporarily.
The cue for the loss came as other investment assets like the equities market recorded losses, a move that weakened the sentiments of investors in riskier assets like oil.
Global stocks retreated on Wednesday as concerns about rising interest rates, high inflation, the war in Ukraine and a slowdown in China’s economy have caused investors to reconsider the prices they are willing to pay for a wide range of stocks.
This came after US Federal Reserve Chairman, Mr Jerome Powell, said he is resolved to raise interest rates until inflation comes down.
Earlier in May, the US central bank raised rates by half a percentage point, its largest hike in two decades, as it looks to fight inflation.
This affected European and American stock markets which were deeply in the red territories.
Also, the US Dollar strengthened as a result and this makes it difficult for holders of other currencies to buy since it becomes more expensive.
Pressure also came as the European Union continues to fail to persuade Hungary to lift its veto on a proposed embargo on Russian oil.
Meanwhile, Russian crude output in April fell by nearly 9per cent from the previous month, an internal report from the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ showed, as Western sanctions on Moscow curbed exports.
On the demand side, hopes of further lockdown easing in China, the world’s largest oil importer, have boosted expectations of a recovery.
Chinese authorities allowed 864 of Shanghai’s financial institutions to resume work on Wednesday and it has relaxed some COVID test rules for travellers.