NEW YORK: Oil prices fell on Wednesday after hitting multi-month highs in the previous session, as investors braced for the US Federal Reserve’s interest rate policy announcement later in the day. Brent crude futures for May were down $1.39, or 1.59%, at $85.99 a barrel by 12:05 p.m. EDT (1605 GMT).
US West Texas Intermediate futures for April delivery, which expire on Wednesday’s settlement, fell $1.80, or 2.16%, to $81.67. The more active May WTI contract was at $81.22 a barrel, down $1.51 or 1.83%. Brent had settled at its highest since Oct 31 in the previous session at $87.38 a barrel, while WTI hit its highest since Oct. 27 at $83.47. The markets are concerned about the Federal Reserve’s rate decision, said Tim Snyder, economist at Matador Economics. “Interest rates have not fallen off like one would have expected,” Snyder said.
The Fed will announce its decision at 2 p.m. EDT on Wednesday. The Fed is not predicted to cut borrowing costs, but fresh economic projections could signal fewer interest rate cuts and a later start to the policy easing than previously expected.
The US dollar index edged higher ahead of the Fed decision, which can also dent oil demand for buyers in countries using other currencies. The US Energy Information Administration (EIA) said crude oil stockpiles fell unexpectedly last week as exports rose and refiners continued to increase activity.
The draw in crude oil inventories was due to higher refinery runs and strong crude oil exports, said Matt Smith, lead oil analyst at Kpler. The American Petroleum Institute also reported crude oil and gasoline stockpiles fell last week, while distillate inventories rose, according to sources.
Elsewhere, Ukrainian attacks on Russian refining assets have helped propel crude prices higher as market participants assessed the impact on crude and fuel supply balances.
“If these disruptions are prolonged, it could eventually force Russian producers to reduce supply if they are unable to export all of this crude oil,” ING analyst Warren Patterson said.