Oil price drops as surging inflation escalates slowdown concerns

Oil dipped below $96 a barrel as sizzling US inflation data raised the prospect of more aggressive interest rate hikes, while high gasoline prices are starting to taking their toll on consumption.

West Texas Intermediate futures closed marginally higher on Wednesday after a volatile session that saw prices hit a three-month low at one point. US inflation soared to a fresh four-decade high last month, reflecting higher costs including gasoline. Demand for the motor fuel plunged last week to the lowest seasonal level since 1996, according to the Energy Information Administration.

Escalating concerns over an economic slowdown have wiped out most of the gains seen after the Ukrainian crisis, which drove the US benchmark above $130 a barrel in March. The turmoil has overshadowed tight physical crude markets, which Goldman Sachs Group says are persisting.

US President Joe Biden is touring the Middle East this week and is scheduled to visit Saudi Arabia. Biden has repeatedly called on OPEC to pump more, and the kingdom along with the UAE are the only group members with significant volumes of unused production capacity.

US crude stockpiles rose by 3.25 million barrels last week, according to the EIA. Inventories at the key storage hub at Cushing, Oklahoma, expanded for a second week to 21.6 million barrels.