Oil eased cautiously ahead of rising US inventories and a possible Fed hike. Oil prices retreated from a three-month high on Wednesday as industry data showed a rise in US crude inventories and investors were cautious in anticipation of a Federal Reserve rate hike later in the day.
Brent crude futures slipped 38 cents, or 0.45%, at 0623 GMT to $83.26 a barrel, while West Texas Intermediate (WTI) crude was at $79.22, down 41 cents, or 0.51%.
U.S. crude inventories increased by about 1.32 million barrels in the week ended July 21, according to market sources citing figures from the American Petroleum Institute (API) on Tuesday. Contrary to that analysts had expected a drop of 2.3 million barrels.
The US government’s EIA data on stockpiles will be released on Wednesday.
The market will continue to be in the tug of war between decreasing demand due to the global economic slowdown and tightening global supply.
While the Fed is largely expected to raise interest rates today, any further action is likely to put pressure on risky assets.
The Fed’s policy meeting began on Tuesday, and most market participants expect the central bank to raise interest rates by 25 basis points after the meeting. However, as price pressures ease, money market traders are split over the possibility of another hike later in the year.
The US dollar is in a gradual uptrend, rebounding from a 15-month low last week, making it more expensive for buyers to buy commodities like oil.
Brent and WTI on Tuesday saw their highest level since April 19 amid concerns over supply amid production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, and Chinese officials’ commitments to support the world’s second-largest economy.
However, concerns about how China, the world’s No.2 oil consumer, will actually step up policy support remained, keeping a further lid on prices. In fact, it is necessary to see what the real policies are, there is a risk that these policies will not meet expectations.
Meanwhile, investors are also waiting to see if leading producer Saudi Arabia will roll over voluntary production cuts to September. They will need to be mindful of expectations and how they manage this tight supply.
Saudi oil exports fell almost 40% in May from the same period a year ago, according to the latest government data released on Tuesday.
