By Georgina McCartney
HOUSTON (Reuters) -Oil prices edged higher on Wednesday after U.S. crude inventories fell and as investors eyed a likely interest rate cut by the U.S. Federal Reserve while weighing its projections for 2025.
Brent futures were up 60 cents, or 0.82%, to $73.79 a barrel at 1:10 p.m. ET. U.S. West Texas Intermediate crude was up 88 cents, or 1.26%, to $70.96. Both benchmarks retreated from gains of more than $1 a barrel at session highs.
U.S. crude stocks and distillate inventories fell while gasoline inventories rose in the week ending Dec. 13, the Energy Information Administration (EIA) said on Wednesday.
Total (EPA:TTEF) product supplied, a proxy for demand, was at 20.8 million bpd, up 662,000 bpd from the prior week.
“The market seems to have turned a corner from all the negativity we saw couple weeks ago as there is more optimism about demand,” said Phil Flynn, a senior analyst for Price Futures Group.
Meanwhile, the Fed is expected to cut rates by a quarter point, and to signal a cautious approach to loosening monetary policy next year.
“While the market has a 25-basis point cut baked in, investors will look for what the forward thinking is from the Fed and how aggressive they will be in 2025,” StoneX analyst, Alex Hodes said in a note.
Between a new policy statement, the projections and Powell’s press conference, the net result is likely to be “a hawkish cut” with a slower pace of reductions to come, Diane Swonk, chief economist at KPMG, wrote ahead of this week’s meeting.
Lower rates decrease borrowing costs, which can boost economic growth and demand for oil.
Uncertainty on how aggressively the U.S. Fed will cut interest rates next year is likely capping oil’s upside for now, said UBS analyst Giovanni Staunovo.
The U.S. central bank will release its policy statement at 2 p.m. ET (1900 GMT), followed by remarks from Chair Jerome Powell.
“The one hurdle we have to get over is the Fed meeting, if the Fed stays in the lane of what is expected then I think oil has a good chance of making new highs today and towards the end of the month,” said Price Futures Group’s Flynn.
This post is originally published on INVESTING.
