HOUSTON: Oil prices dipped on Wednesday, after US crude inventories fell less than expected ahead of an expected Federal Reserve rate hike later in the day that could cut demand.
Brent crude futures were down 65 cents, or 0.8 %, at $82.99 a barrel by 1614 GMT (1214 p.m. ET), while US West Texas Intermediate (WTI) crude was at $78.92, down 68 cents, or 0.9%. Both fell by more than $1 earlier in the session, after hitting three-month highs on Tuesday.
US crude inventories drew by 600,000 barrels in the week ended July 21, according to data from the US Energy Information Administration, compared with estimates for a draw of 2.35 million barrels. Industry group American Petroleum Institute figures had indicated a 1.32 million barrels build.
Gasoline and diesel stocks also drew less than expected, EIA data showed.
“The drawdowns weren’t all that spectacular. It was a neutral to bearish report, plus the Federal Reserve rate hike can have a dampening hit on demand and prices,” said John Kilduff, partner at Again Capital LLC in New York.
Oil prices have rallied for four weeks, buoyed by signs of tighter supplies, largely linked to output cuts by Saudi Arabia and Russia, as well as Chinese authorities’ pledges to shore up the world’s second-biggest economy.
Although the market expects Saudi Arabia to roll over its August output cuts to September, sources told Reuters on Wednesday that Russia is expected to significantly increase oil loadings in September, bringing to an end steep export cuts.
Meanwhile, concern is high over whether China, also the world’s second-biggest oil consumer, will deliver on its policy pledges.
“We still need to wait for actual policies - the risk is that these policies fall short of expectations,” said ING head commodities strategist Warren Patterson.
“The market will continue to be in a tug-of-war between tightening global supply and fears of slowing demand due to the global economic slowdown,” Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, added.
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