Oil expected to fall further as hawkish Fed cuts growth forecast A break below $82.28 could trigger downside momentum

EIA crude inventories rise for third straight week, hinting at lower crude demand

West Texas Intermediate (WTI) futures on the New York Mercantile Exchange (NYMEX) pulled back weakly after hitting a low of $82.28 a barrel in early European trading. Oil prices fell sharply on Wednesday after failing to hold above key resistance at $86. Oil prices fell after the Federal Reserve (Fed) announced a third consecutive rate hike of 75 basis points.

Investors sold long positions in crude oil as the Federal Reserve's tightening measures prompted further cuts to growth forecasts. If Fed Chairman Jerome Powell only announces a rate hike, the impact on oil prices will be smaller. The rise in terminal interest rates is in line with market forecasts. However, word of the central bank's strategic plan to tackle rising inflation dampened market sentiment.

Federal Reserve Chairman Jerome Powell sees rates at 4.6% by the end of 2023. Guidance has been moved higher from 3.8%. In addition, the unemployment rate is expected to rise to 4.1%. Big tasks come with big sacrifices, and economic growth will face severe pain from faster rate hikes. The decline in economic growth forecasts will ultimately reduce oil demand in the long run.

Adding fuel to the fire was a build in oil inventories reported by the Energy Information Administration (EIA). The EIA reported that oil inventories rose by 1.142 million barrels. There is no doubt that the reading is still below consensus, but the third consecutive inventory build points to a clear decline in oil demand.