Oil prices declined in early trade on Wednesday ahead of an interest rate decision from the Federal Reserve and amid a surprise rise in US crude inventories.
Brent crude for the February contract declined 0.24% to $80.49 per barrel as of 9:00 am GST, after rallying over the previous two sessions. The US West Texas Intermediate (WTI) crude futures for January delivery also went up 0.19% to $75.25 a barrel as of the same time.
US Fed is expected to raise interest rates by 50 basis points on Wednesday, slowing from the 75-basis-point pace they had been at in its last four meetings since June.
Investors are taking profits as risks persist ahead of the Fed meeting, said Tina Teng, a CMC Markets analyst, Reuters reported.
"But I still expect that oil prices may continue their recent rebounding pace," she said. Earlier selloffs, driven by fears of recession, had stopped after two recent data releases indicated that US inflation subsided.
The US consumer price index edge up 0.1% in November after a 0.4% rise the previous month, signaling that worst of inflation is likely over.
What to watch for "Any commentary from the Fed indicating further deceleration of rate hikes in the U.S. would be supportive to oil prices from here," said Baden Moore, head of commodities research at National Australia Bank, Reuters reported.
Another factor is the unexpected build in US crude inventories, which rose by about 7.8 million barrels in the week to December 9, according to market sources citing data from the American Petroleum Institute. Analysts polled by Reuters had expected a 3.6 million barrel decline in stockpiles.
The US crude stocks data reinforced fears about weakening demand despite tight supplies, dampening bullish sentiment in the previous session, on hopes for a rebound in Chinese demand with the loosening of COVID-19 curbs and for a softening dollar after data showed US inflation cooling.
Meanwhile, TC Energy Corp. is aiming for a partial restart of a segment of the Keystone oil pipeline on Wednesday and full resumption on December 20, Bloomberg reported, citing people familiar with the matter.
