Oil Prices Remain Steady Amid Mixed Signals

Oil prices remained largely unchanged in Asian trade on Wednesday as traders refrained from making significant bets, awaiting more direction on interest rates. Meanwhile, industry data on U.S. inventories provided limited insight.

Crude prices have been mostly rangebound this week after gaining the previous week due to the potential for increased U.S. sanctions on Russian oil supplies. However, this momentum has dissipated amid concerns regarding weakening demand in China and worries over a potential supply glut next year.

Additionally, the oil markets faced pressure from a stronger dollar, as traders leaned towards the greenback in anticipation of the conclusion of a Federal Reserve meeting.

Brent oil futures set to expire in February stabilized at $73.20 a barrel, while West Texas Intermediate crude futures remained flat at $69.66 a barrel as of 20:11 ET (01:11 GMT).

U.S. Crude Inventories and Fuel Demand

According to the American Petroleum Institute's data released on Tuesday, U.S. oil inventories decreased by 4.7 million barrels in the week ending December 13, significantly surpassing expectations of a 1.9 million barrel draw.
However, gasoline inventories rose by 2.4 million barrels, and distillates increased by an additional 700,000 barrels.

This data suggests while overall U.S. supplies are tightening, fuel demand may be cooling due to reduced travel during the winter months, a trend anticipated to persist for at least the next two months. However, last week’s decline follows two weeks of substantial builds, and the API report typically forecasts similar data from government inventories that will be released later on Wednesday.

Awaiting the Fed's Decisions

Attention this week has been largely focused on the Federal Reserve's meeting, which is set to conclude later on Wednesday. The central bank is expected to cut interest rates by 25 basis points, but traders are looking for indications that the Fed may adopt a slower pace of rate cuts in the coming months, particularly as recent data has revealed persistent inflation, strong consumer spending, and a robust labor market.

Expectations of this scenario have strengthened the dollar, putting additional downward pressure on oil prices. Higher interest rates projected for next year are also expected to impact economic growth, potentially limiting oil demand. However, the resilience of the U.S. economy could counteract this trend.

Concerns regarding slowing demand continue to grow as top importer China reports various mixed economic indicators recent weeks, and the signals for additional stimulus measures have largely fallen short of expectations.