Oil prices fell Wednesday as investors locked in profits ahead of an upcoming update from inventory data of the US Federal Reserve and the US Energy Information Administration. Concerns about tightening supply due to geopolitical tensions limited losses.
Brent crude futures which were up 2.2% in the previous session, slid down 32 cents, or 0.4%, to $87.88 a barrel at 0513 GMT.
West Texas Intermediate (WTI) crude futures fell 45 cents, or 0.5%, to $85.15 a barrel after climbing 2.8% on Tuesday.
The market decline was limited due to the escalating geopolitical tensions threatening the industry such as between Russia and Ukraine and in the UAE.
Oil prices hit a seven-year high last week on concerns that supplies could tighten amid Ukraine-Russia tensions.
Plans are being made to protect Europe from a potential energy supply shock. While the US told President Vladimir Putin it would consider personal sanctions if Russia invaded Ukraine, western leaders stepped up military preparations.
Concerns about the Middle East rose on Monday when Yemen’s Iran-linked Houthi movement launched a missile attack on the United Arab Emirates base, which houses the US military. U.S. and United Arab Emirates officials said the attack was thwarted.
Investors are locked in profits, taking into account a collapse in global share prices following the Fed’s monetary policy update.
As the FED wraps up a two-day policy meeting later in the day, market players await more clues on the timing and pace of rate hikes, as well as how it will shrink the central bank’s nearly $9 trillion balance sheet.
Market sources indicate that US crude inventories are falling.
The weekly US inventory data released by the American Petroleum Institute (API) met expectations. Market sources said the week ended Jan. 21, showing that US crude and distillate stockpiles fell, while gasoline inventories increased. Traders are now focused on the EIA report to be released at 1530 GMT to confirm these trends.
According to another development, the US has approved the exchange of oil from the strategic reserve. The U.S. Department of Energy said Tuesday it has approved swaps of 13.4 million barrels of crude to seven companies from the Strategic Petroleum Reserve as part of Biden’s effort to help control oil prices.