Oil prices dip as Fed meeting looms, U.S. stockpiles seen rising

© Reuters.

By Ambar Warrick

Investing.com -- Oil prices crept lower in early Asian trade on Wednesday as industry data pointed to another week of rising inventories in the world’s largest crude consumer, while an upcoming Federal Reserve interest rate decision spurred cautious plays.

Data from the American Petroleum Institute showed that U.S. crude stockpiles unexpectedly rose in the week to March 17, heralding a similar reading from government data due later in the day.

Analysts expect a draw of 1.55 million barrels from the government reading. But any surprises to the upside will see inventories growing for 13 of the past 12 weeks, indicating high supply and weak demand in the country.

Brent oil futures fell 0.4% to $74.87 a barrel, while West Texas Intermediate crude futures fell 0.7% to $69.22 a barrel by 21:41 ET (01:41 GMT). Both contracts surged between 1.7% and 3% on Tuesday.

Crude prices recovered from 15-month lows this week amid some easing fears of a banking crisis, as the government stepped in to restore faith in the banking system.

But fears of a potential economic slowdown persisted, given that the recent collapse of several U.S. banks highlighted the growing pressure on the economy from rising interest rates and high inflation.

Focus is now squarely on the results of the Federal Reserve’s meeting later in the day, with the central bank expected to hike interest rates by 25 basis points. Easing fears of a banking crisis also saw investors bet that the Fed will remain unwavering in its fight against inflation, which spells higher interest rates and more pressure on commodity markets.

Oil prices were nursing steep losses for the year amid concerns that slowing economic growth will weigh heavily on global crude demand. Markets fear that this trend could offset a recovery in China, the world’s largest crude importer. But the country is still forecast to drive oil demand to record highs this year.

Markets are also holding out for more cues from an OPEC+ meeting next month, with hopes that the cartel will cut production in response to a recent tumble in prices.