Oil Edges Higher as US Stockpiles Shrink Ahead of Fed Meeting

  • Bloomberg
  • Commodities News
Oil Edges Higher as US Stockpiles Shrink Ahead of Fed Meeting
Credit: © Reuters.

(Bloomberg) -- Oil rose as an industry report signaled a big drop in US crude inventories ahead of a Federal Reserve meeting where the central bank is expected to sharply hike interest rates.

West Texas Intermediate futures climbed above $95 a barrel after closing 1.8% lower in the previous session. The American Petroleum Institute reported crude stockpiles fell by 4.04 million barrels last week, according to people familiar with the figures. If confirmed by the Energy Information Administration later Wednesday, it would be the largest draw since the end of May.

The Fed is expected to approve another large rate increase on Wednesday to combat rampant inflation, escalating concerns that the US may be heading for a recession. Fears over an economic slowdown have rippled through commodities and overshadowed signs of a tight physical crude market.

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Oil is up more than 25% this year, although the market has been gripped by bouts of volatility over recent months amid low liquidity. Majors including Shell (LON: RDSa ) Plc and Exxon Mobil Corp (NYSE: XOM ). are scheduled to report second quarter earnings this week and are expected to post bumper profits after energy prices surged.

The Biden administration laid out plans to refill the nation’s depleted oil reserves, which have been tapped to counter soaring gasoline prices. The Energy Department plans to replenish the Strategic Petroleum Reserve with oil purchases that are likely to begin after fiscal 2023 and could be made via fixed-price contracts, an administration official said Tuesday.

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