Oil edged lower after a four-day rally of almost 6% as traders took stock of the advance and looked toward a US interest-rate decision.
West Texas Intermediate traded near $79 a barrel after closing at the highest level since mid-April. The gains have been fueled by signs that the global market is starting to tighten, and moves by China’s leadership revive growth in the world’s largest crude importer after its recovery faltered.
The Federal Reserve is expected to raise borrowing costs to the highest level in 22 years later Wednesday, while at the same time retaining a tightening bias that signals the possibility of another move upward later this year. Higher rates risk slowing the economy and hurting energy consumption.
Crude has pushed higher this month as supply curbs from OPEC+ heavyweights Saudi Arabia and Russia took hold, with Moscow’s exports ebbing. That’s helped prices to close above their 200-day moving average this week, while WTI’s prompt spread has shifted more deeply into backwardation, a bullish pattern that signals tight supply.
The industry-funded American Petroleum Institute reported a mixed picture on crude inventories, flagging an increase of 1.3 million barrels at the national level last week, but a drop of 2.3 million at the key oil storage hub at Cushing, Oklahoma. Data from AlphaBBL also pointed to a decline at Cushing. Official figures are due later Wednesday.
“Sentiment is supported by China’s stimulus-measure announcements,” said Charu Chanana, market strategist for Saxo Capital Markets Pte in Singapore. Still, there’s a sense of caution ahead of the Fed meeting amid fears that another rate hike may be signaled, she said.
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