Investing.com -- Oil prices moved little in early Asian trade on Wednesday as traders hunkered down before the conclusion of a Federal Reserve meeting, although fears of worsening economic conditions left prices wallowing at five-week lows.
Signs of a bigger-than-expected draw in U.S. crude inventories offered little support to crude markets, as a string of weak manufacturing readings fueled more uncertainty over a recovery in crude demand this year.
American Petroleum Institute (API) data showed U.S. inventories shrank by 3.9 million barrels in the week to April 28, although mixed readings on gasoline and distillate stockpiles pointed to wavering fuel demand.
The reading usually heralds a similar trend from government data, which is due later on Wednesday.
Brent oil futures were flat at $75.25 a barrel, while West Texas Intermediate crude futures fell 0.1% to $71.58 a barrel by 20:33 ET (00:33 GMT). Both contracts were sitting at their lowest levels since late-March.
Crude oil prices plummeted over 5% on Tuesday following weak manufacturing and factory orders data from the U.S., UK, and the euro zone, which pointed to a further cooling in economic activity amid high interest rates.
Focus is now squarely on the conclusion of a Federal Reserve meeting later in the day, where the central bank is expected to hike interest rates by another 25 basis points. But markets are betting that signs of worsening economic activity will see the bank announce a pause in its rate hike cycle.
A warning on a potential U.S. debt default furthered this notion.
Renewed concerns over a U.S. banking crisis also weighed on crude markets, after the emergency takeover of First Republic Bank (NYSE:FRC) by JPMorgan Chase & Co (NYSE:JPM). The move sparked a rout in shares of other regional lenders, amid concerns over a wider liquidity crunch in the sector.
The bank rout came on the heels of data that showed a surprise drop in Chinese manufacturing activity through April, indicating that a post-COVID economic rebound in the world’s largest oil importer was running out of steam. This saw markets rethink bets that China could lead a recovery in oil demand this year.
Concerns over slowing demand have battered oil prices in recent weeks, largely offsetting tightening supply after a production cut by the Organization of Petroleum Exporting Countries and allies.
While the production cut had initially lifted crude prices in early-April, they reversed all gains by the end of the month.