Investing.com -- Oil prices fell slightly on Wednesday as investors hunkered down before a widely-expected rate hike by the Federal Reserve, while signs of a potential build in U.S. inventories also weighed.
But crude prices remained close to three-month highs hit this week, with West Texas Intermediate crude futures coming within sight of the bullish $80 a barrel level. Signs of tightening supply, coupled with promises of more stimulus measures in major importer China, drove strong gains in the oil market.
This trend somewhat cooled on Wednesday, with traders turning cautious before the conclusion of a Fed meeting later in the day. Industry data also signaled that U.S. crude inventories unexpectedly grew in the week to July 21.
Brent oil futures fell 0.4% to $82.88 a barrel, while WTI futures fell 0.4% to $79.30 a barrel by 22:44 ET (02:44 GMT).
Oil markets also saw a measure of profit taking after both major contracts surged between 4% and 6% over the past four sessions.
U.S. inventories seen unexpectedly rising
Data from the American Petroleum Institute showed on Tuesday that U.S. crude inventories likely grew by 1.3 million barrels in the past week, compared with expectations for a draw of 1.9 million barrels.
The reading indicated that U.S. supplies may not be as tight as previously expected. But signs of a draw in gasoline inventories showed that fuel demand remained steady, thanks largely to the travel-heavy summer season.
Government data on inventories is due later on Wednesday.
Global oil supplies are also set to tighten as the effects of production cuts by Saudi Arabia and Russia begin to be felt.
Fed rate hike, outlook awaited
The Fed is widely expected to raise interest rates by 25 basis points later in the day. But while the hike appears to be largely priced in by markets, uncertainty over the Fed’s outlook kept sentiment muted on Wednesday.
Fed Fund future prices indicate that markets are pricing in the possibility that Wednesday’s hike will be the bank’s last for the year. But the Fed has given no such indication, and has forecast at least one more hike after today, given that inflation is still trending above the central bank’s annual target.
Rising interest rates factored into fears that economic growth will slow this year, denting oil demand. This trend weighed heavily on crude markets this year, with prices only recently beginning to trade positive for 2023.