Investing.com– Oil prices fell Wednesday, dropping for the third straight session as industry data showed an unexpected build in U.S. inventories, raising doubts over demand in the world’s largest crude consumer. 

At 08:25 ET (12:25 GMT),  sank 1.1% to $81.98 a barrel, while fell 1.1% to $77.82 a barrel. 

US inventories see unexpected build – API 

Data from the showed that U.S. oil inventories grew by 2.5 million barrels in the week to May 17, something of a surprise given market expectations for a draw of 3.1 million barrels. 

The unexpected build in inventories raised some concerns over sluggish U.S. oil demand, especially ahead of the upcoming Memorial Day holiday, which traditionally marks the beginning of the summer driving season. with regards to fuel consumption. The API data usually heralds a similar reading from , which is due later on Wednesday.

Traders were fearful that pressure from sticky inflation and high interest rates would limit the growth in demand over the coming months, with gasoline stockpiles also growing by 2.1 million barrels.

The API data usually heralds a similar reading from , which is due later on Wednesday.

Rate fears in play ahead of Fed minutes 

Also weighing on sentiment were concerns that the Federal Reserve might keep U.S. interest rates higher for longer due to sustained inflation, potentially impacting fuel use in the world’s largest consumer.

A number of Fed officials have warned that the central bank needed much more confidence that inflation was falling, before it could begin cutting interest rates. 

The are due later on Wednesday, and are expected to offer more cues on the central bank’s plans to cut rates. 

OPEC+ meeting draws near 

Beyond the Fed, the focus is also on a meeting of the Organization of Petroleum Exporting Countries and allies, a group known as OPEC+ in early-June.

The group of major producers are currently making voluntary output cuts totalling about 2.2 million barrels per day for the first half of 2024, led by Saudi Arabia rolling over an earlier voluntary cut.

Traders are looking for any signs that the cartel will extend its current run of production cuts.

“Oil inventories falling by less than we had expected in recent weeks and U.S. interest rates staying higher for longer are likely to have an impact on OPEC+’s policy of being proactive, preemptive, and precautionary,” said analysts at UBS, in a note earlier this month. 

“We now expect the eight member states with voluntary production cuts to extend them by at least three months ahead of the ordinary meeting at the beginning of June.”

(Ambar Warrick contributed to this article.)