US West Texas Intermediate (WTI) crude futures were down 59
cents, or 0.85%, at $69.08. Data from the American Petroleum Institute on
Tuesday showed US crude inventories rose by about 3.3 million barrels in the
week ended March 17, sources said.
That defied expectations for a drawdown of about 1.6 million
barrels from eight analysts polled by Reuters.
Traders and analysts will be looking out for data from the
US Energy Information Administration on Wednesday to see whether it confirms
signs of weaker crude demand.
“However, key for markets today will be the FOMC meeting
amid continued uncertainty over whether the Fed will hold rates or hike by
25bp,” analysts at ING Bank said in a client note. Markets are awaiting the
outcome of what is widely seen as the most challenging Fed policy decision in
recent times.
Following the meeting, Chair Jerome Powell is expected to
unveil new economic projections and the central bank’s path for interest rate
hikes.
Despite market expectations for a 25 basis points rate
increase, some top central bank watchers say the Fed could well pause further
rate hikes or delay releasing new economic projections due to ructions in the
global banking sector.
A pause in rate hikes would help stoke economic activity and
in turn boost fuel demand. Oil prices posted their biggest declines in months
last week, after high-profile US bank failures beginning March 10 and a crisis
at Europe’s Credit Suisse.
An emergency rescue of Credit Suisse over the weekend helped
revive oil prices. OPEC+ officials, hedge fund managers and oil market
participants have called the recent decline in oil prices speculative and
insisted that increasing demand will push prices to higher levels in the coming
months.
Analysts have also noted that turmoil in the US banking
sector could support these fundamentals in the medium term. “There are concerns
that supply may also get hit more than demand amid the banking crisis.
US shale output is most at risk from tighter credit
conditions from regional US banks,“ analysts from ANZ Bank said in a note on
Wednesday morning. -
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