Oil prices fell on Wednesday as investors booked profits before announcing a Federal Reserve decision and US Energy Information Administration data on crude stockpiles, but concerns about a supply shortage due to geopolitical tensions limited losses.
Oil prices hit a 7-year high last week, amid fears of tight supplies due to tensions between Ukraine and Russia.
US President Joe Biden said on Tuesday he would consider sanctions against President Vladimir Putin if Moscow invaded Ukraine, while Western leaders ramped up military preparations and drew up plans to protect Europe from a potential energy supply crisis.
Concerns about the Middle East also escalated on Monday when the Yemeni Houthi movement - allied with Iran - launched a missile attack on a base in the UAE hosting US forces.
“The market trend is limited due to the increasing tension between Russia and Ukraine and the threat to infrastructure in the UAE,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Brent crude futures fell 32 cents, or 0.4%, to $87.88 a barrel by 05:13 GMT, after jumping 2.2% in the previous session.
US West Texas Intermediate crude futures fell 45 cents, or 0.5%, to $85.15 a barrel, after rising 2.8% on Tuesday.
The Federal Reserve will conclude its two-day meeting later today, as traders are anxiously awaiting more indications about the timing and pace of interest rate hikes, as well as how the US Central Bank will begin reducing its balance sheet, which amounts to nearly $9 trillion.
The weekly US inventory data issued by the American Petroleum Institute during the night came in line with expectations, and sources said that the data showed a decline in US crude stocks and distillates, while gasoline stocks rose during the week ending on January 21st.
In contrast to this news, the German agency reported - quoting Bloomberg News Agency - that oil futures prices started trading today, Wednesday, by continuing above the level of $ 85 a barrel, after the release of US economic data that indicated a decline in crude stocks in the United States, and investors’ growing fears of developments Ukrainian crisis.
The market is awaiting data from the US Energy Information Administration on inventory later today, and if the administration confirms the inventory decline, this will be the eighth weekly decline in 9 weeks.