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(Bloomberg) — Oil extended a decline after an industry estimate pointed to a large build in US inventories and investors assessed the outlook for US monetary policy following data showing still-elevated inflation.

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West Texas Intermediate dropped below $79 a barrel in early Asian trading after ending more than 1% lower on Tuesday. The industry-funded American Petroleum Institute reported that US commercial crude inventories expanded by 10.5 million barrels last week, according to people familiar with the figures. Stockpiles of gasoline and distillates also increased, according to the data. 

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Investors are trying to work out how much higher the US Federal Reserve will push interest rates to quell the pace of price gains. Consumer prices rose 0.5% in January, the most in three months, and the annual inflation rate came in at a higher-than-expected 6.4%, according to official figures on Tuesday.

Oil has struggled this week despite Russia’s plan to reduce supplies as sanctions bite amid the war in Ukraine, and optimism about the outlook for consumption in China with activity picking up. A US plan for a mandated sale of barrels from the Strategic Petroleum Reserve has weighed on prices, which have also been burdened by expectations for higher US interest rates.

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US crude stockpiles have swelled this year to hit the highest level since mid-2021 after expanding for seven straight weeks. Following the API estimate, government data on last week’s movements will be released later Wednesday.

In addition, the Paris-based International Energy Agency, which advises rich nations on policy, is due to issue its monthly market snapshot, offering traders fresh insights into supply-and-demand trends over 2023. On Tuesday, the Organization of Petroleum Exporting Countries said that it expected a slightly tighter global oil market than it had previously forecast.