Oil prices fell on Wednesday as investors took profits ahead of the Federal Reserve’s latest news, but losses were capped by concerns about tight supply due to tensions in Ukraine and the Middle East.
Brent crude futures were down 15 cents, or 0.2%, at $88.05 a barrel by 0105 GMT, after rising 2.2% in the previous session.
U.S. West Texas Intermediate (WTI) crude futures slipped 31 cents, or 0.4%, to $85.29 a barrel, having climbed 2.8% on Tuesday.
“Some corrections have kicked in as investors wanted to adjust their positions ahead of the Fed meeting,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“But downside is limited due to heightened tensions between Russia and Ukraine and the threat to infrastructure in the United Arab Emirates,” he said, adding that oil was likely to continue its upward run after the Fed update.
The Fed is expected to firm up plans to raise interest rates and shrink its holdings of U.S. Treasury bonds and mortgage-backed securities, which have swollen its balance sheet to about $9 trillion.
Oil prices hit a seven-year high last week on fears of a possible tightening of supply due to Ukraine-Russia tensions and concerns over the conflict in Yemen.
U.S. President Joe Biden said on Tuesday he would consider imposing personal sanctions on President Vladimir Putin if Russia invaded Ukraine, while Western leaders increased military preparedness and developed plans to protect Europe from a potential shock to energy supplies.
In the Middle East, Yemen s Iran-aligned Houthi movement launched a missile attack on Monday on a UAE base hosting the U.S. military. The attack was thwarted by U.S.-built Patriot interceptors, U.S. and Emirati officials said.
Meanwhile, U.S. crude and distillate stocks fell while gasoline inventories rose for the week ended Jan. 21, with crude inventories declining by 872,000 barrels, according to market sources citing American Petroleum Institute figures on Wednesday.
The figures were within analysts estimates, Nissan Securities Kikukawa said.
On the supply side, the U.S. Department of Energy said on Tuesday it had approved an exchange of 13.4 million barrels of crude from the Strategic Petroleum Reserve to seven companies as part of Biden’s efforts to help rein in oil prices.