Oil prices eased on Wednesday off three-month highs as industry data showed a stock build in U.S. crude inventories and investors remained cautious ahead of a likely Fed rate hike.
Brent crude futures slipped 46 cents, or 0.55%, to $83.18 a barrel by 0451 GMT, while U.S. West Texas Intermediate (WTI) crude was at $79.18 a barrel, down 45 cents, or 0.57%.
U.S. crude stocks rose by about 1.32 million barrels in the week ended July 21, according to market sources citing American Petroleum Institute figures on Tuesday. Analysts polled by Reuters also expect a 2.3 million barrel drawdown.
U.S. government data on inventories is due on Wednesday.
“The market will continue to be in a tug-of-war between tightening global supply and fears of slowing demand due to global economic slowdown,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, adding that investors had also squared their positions ahead of another expected interest rate increase by the U.S. Federal Reserve.
Investors are also cautious about the impact of the Fed decision on oil demand. The Fed meeting ends on Wednesday.
“Whilst the market is largely expecting the Fed to hike rates today, any signals that they still have more to do after this would likely put some pressure on risk assets,” said ING head commodities strategist Warren Patterson.
The Fed’s policy meeting started on Tuesday, with most market participants expecting the central bank to deliver a 25 basis-point rate hike when it concludes.
The U.S. dollar has been on a gradual uptrend, rebounding from a 15-month low last week and making it more expensive for buyers to procure commodities such as oil.
Crude prices slipped after Brent and WTI on Tuesday hit their highest since April 19 amid concerns about supply due to output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and allies, and pledges by Chinese authorities to shore up the world’s second-largest economy.
However, concerns about how China, the world’s No.2 oil consumer, will actually step up economic policy support remained, keeping a further lid on prices.
“We still need to wait for actual policies – the risk is that these policies fall short of expectations,” ING’s Patterson said.
Investors are also waiting to see if major producer Saudi Arabia will roll over voluntary production cuts into September.
“They will need to manage expectations and be careful on how they go about unwinding this cut too aggressive and it could put some downward pressure on the market,” Patterson added.
Saudi oil exports fell almost 40% in May from the same period a year ago, latest government data released on Tuesday showed.
(Reporting by Yuka Obayashi and Trixie Yap; Editing by Sonali Paul and Miral Fahmy)