By Gina Lee
Investing.com – Oil was down on Thursday morning in Asia. Investors cashed in profits from the previous session’s 2% gains after the U.S. Federal Reserve indicated an "imminent” interest rate hike that triggered a technical correction in surging energy markets.
Brent oil futures fell 0.83% to $88 by 11:27 PM ET (4:27 AM GMT) after rising about 2% to hit the $90 mark for the first time in seven years on Wednesday. WTI futures slid 0.85% to $86.61.
Asian shares were down, while the dollar was on an upward trend after the Fed on Wednesday signaled that it could hike interest rates as soon as March 2022 in its policy decision. Investors also continue to monitor U.S.-Russia tensions over Ukraine, as fears of disruptions of natural gas to Europe continue to rise.
"Continued supply challenges and mounting Russia-Ukraine tensions continue to support crude oil prices. It is down slightly today but I think it is nothing more than a technical move," OCBC economist Howie Lee told Reuters.
While the Russia-Ukraine tensions have a role in lifting oil prices, "real supply challenges both within the Organization of the Petroleum Exporting Countries (OPEC) and the U.S.... have been the main drivers in pushing the market higher," he added.
The cartel missed its planned supply increase target in December 2021, accentuating capacity constraints that are limiting supply as fuel demand continues to recover.
OPEC+, or OPEC and allies, is also gradually reversing 2020's output cuts as fuel demand recovers. However, many smaller producers have been unable to meet supply targets, while other members remain cautious about excessive pumping too much in case COVID-19 hits demand again.
Meanwhile, a build in U.S. crude inventories alleviated some concerns about supply, with Wednesday’s data from the U.S. Energy Information Administration showing a build of 2.377 million barrels in the week to Jan. 21. Forecasts prepared by Investing.com predicted a 728,000-barrel draw. A 515,000-barrel build was reported during the previous week.
Crude oil supply data from the American Petroleum Institute from the day before showed a draw of 872,000 barrels.