Oil prices traded in a narrow range early on Wednesday as investors remained cautious ahead of an expected interest rate cut by the U.S. Federal Reserve, while weighing up the potential supply impact of tighter sanctions on Russia.
Brent futures inched up 1 cent at $73.20 a barrel at 0420 GMT, while U.S. West Texas Intermediate crude rose 1 cent to $70.08 a barrel.
The market is watching out for clues on interest rate moves for 2025 following the Federal Open Market Committee’s (FOMC) meeting, which ends later on Wednesday, analysts said.
“Additional sanctions from the West may limit some losses in today’s session, but a cautious tone persists in the lead-up to the FOMC meeting,” said Yeap Jun Rong, market strategist at IG.
“Looking ahead, oil prices are likely to remain constrained within their current range, with subdued price action expected to persist through the end of the year,” Yeap added.
The Fed on Wednesday is widely expected to cut interest rates for the third time since its policy easing cycle began.
“Projections for rate cuts in 2025 are being second-guessed, especially with Trump planning a comeback on January 20,” said Priyanka Sachdeva, senior market analyst with Phillip Nova.
“There is a prevailing narrative that Trump’s policies may lead to inflation, which, coupled with concerns about potential interference with the Federal Reserve’s autonomy, is causing oil investors to remain cautious,” she added.
Lower rates decrease borrowing costs, which can boost economic growth and demand for oil.
Meanwhile, the European Union on Tuesday adopted a 15th package of sanctions against Russia over its invasion of Ukraine, adding an additional 33 vessels from Russia’s shadow fleet used for transporting crude or petroleum products. Britain also sanctioned 20 ships for carrying illicit Russian oil.
The fresh sanctions could stoke further oil price volatility though so far they have not succeeded in shutting Russia out of the global oil trade.
In the U.S., American Petroleum Institute data on Tuesday showed that crude stocks fell by 4.69 million barrels in the week ended Dec. 13, a source said. Gasoline inventories rose by 2.45 million barrels, and distillate stocks rose by 744,000 barrels, according to the source.
Analysts projected U.S. energy firms pulled about 1.6 million barrels of crude from storage during the week ended Dec. 13, according to a Reuters poll on Tuesday.
The U.S. Energy Information Administration will release its oil storage data on Wednesday.
(Reporting by Colleen Howe in Beijing and Jeslyn Lerh in Singapore; Editing by Shri Navaratnam and Sonali Paul)