Oil prices slump as stockpiles and rate hikes stoke demand fears

Brent crude futures lost $3.88, or 3.6%, to $103.04 a barrel by 1224 GMT after slipping 0.4% in the previous session. U.S. West Texas Intermediate crude futures were down $3.79, or 3.8%, at $96.09 after a 1.9% drop on Wednesday.

Both were down more than $5 earlier in the session.

Oil futures trading volumes have been thin and prices volatile as traders have to square weaker energy demand with tighter supply resulting from the loss of Russian barrels after the country’s invasion of Ukraine.

The European Central Bank on Thursday joined many other central banks in raising interest rates, focusing on fighting runaway inflation rather than the economic downturn, which can weigh on oil demand.

The Bank of Japan, meanwhile, maintained ultra-low interest rates to stimulate stalling economic growth.

U.S. gasoline inventories rose by 3.5 million barrels last week, government data showed on Wednesday, far exceeding analyst forecasts. [EIA/S]

“U.S. gasoline demand is struggling to shift into top gear during the peak summer driving season,” said PVM analyst Stephen Brennock.

Libya’s National Oil Corp (NOC) on Wednesday said that crude production had resumed at several oilfields after the lifting of force majeure on oil exports last week.

On the natural gas front, Gazprom resumed flows via the Nord Stream 1 pipeline that supplies more than a third of Russian gas exports to the European Union.

However, one of Canada’s major oil export arteries, the Keystone pipeline, was operating at reduced rates for a third day on Wednesday, operator TC Energy said.