Oil futures dipped on Thursday (June 22) amid demand fears after the Federal Reserve chairman hinted at further interest rate hikes, while traders awaited official US inventory data following an industry report that showed an unexpected draw in crude stocks.
Brent futures fell 20 cents, or 0.3%, to US$76.92 a barrel at 0400 GMT, while US West Texas Intermediate (WTI) crude futures were down 19 cents, or 0.3%, at US$72.34.
The benchmarks had gained a dollar a barrel in the previous session as US corn and soybean prices raced to multi-month highs, raising expectations that crop shortfalls around the globe could lower biofuels blending and increase oil demand.
However, the market was cautious as Fed Chair Jerome Powell in congressional testimony on Wednesday reinforced that the central bank's objective was to rein in inflation and said two more 25-basis point rate hikes by year end was "a pretty good guess".
Higher interest rates ultimately increase borrowing costs for consumers, which could slow economic growth and reduce oil demand.
Oil prices held on to most of the previous session's gains as the market kept a lookout for fresh drivers, including signs of Chinese demand optimism and the latest US inventory data.
"China's economic rebound is still the focus of oil traders. More stimulus measures by the Chinese government could improve the oil demand outlook," said Tina Teng, markets analyst at CMC, adding that data next week on Chinese factory activity could steer oil price moves.
Meanwhile, official inventory data from the US Energy Information Administration is due later on Thursday. The report was delayed by a day following the Juneteenth public holiday on Monday.
In a preliminary indicator, data from the American Petroleum Institute, an industry group, showed US crude oil inventories fell by about 1.2 million barrels in the week ended June 16, defying analysts' forecasts for a build of 300,000 barrels.
However, oil prices could rise as muted increases in US oil production and cuts by the Opec+ producing-nations group will limit crude supply in the months ahead, an executive at US shale producer EOG Resources said on Wednesday.