Oil prices rose slightly on Wednesday as investors stayed cautious ahead of a potential interest rate cut by the U.S. Federal Reserve, while a draw in U.S. crude inventories offered further support.
Brent futures rose 57 cents, or 0.78%, to $73.56 a barrel at 0923 GMT, while U.S. West Texas Intermediate crude climbed 63 cents, or 0.90%, to $70.71 a barrel.
The Fed's two-day policy meeting began Tuesday, focusing on updated economic projections and the dot plot, which could provide insights into interest rate trends through 2025 and 2026.
The U.S. central bank will release its policy statement at 1900 GMT, followed by remarks from Chair Jerome Powell.
Markets see a 95.4% chance of a quarter-point rate cut at this meeting, according to CME's FedWatch tool.
Lower rates decrease borrowing costs, which can boost economic growth and demand for oil.
"Oil prices ought to see more of a reaction to the crude inventory draw seen in the API data overnight... however, such is the diverting power of central bank rate decisions that investors in all of the trading mediums are taking a very light touch to proceedings" said John Evans, analyst with oil broker PVM.
In the U.S., American Petroleum Institute data on Tuesday showed that crude stocks fell by 4.69 million barrels in the week ended Dec. 13, a source said. Gasoline inventories rose by 2.45 million barrels, and distillate stocks rose by 744,000 barrels, according to the source.
Analysts projected U.S. energy firms pulled about 1.6 million barrels of crude from storage during the week ended Dec. 13, according to a Reuters poll on Tuesday.
The U.S. Energy Information Administration will release its oil storage data on Wednesday.
"Trade war fears and uncertainty on how aggressive the U.S. Fed will cut interest rates next year is likely capping the upside for now," UBS analyst Giovanni Staunovo said.
"There is a prevailing narrative that Trump's policies may lead to inflation, which, coupled with concerns about potential interference with the Federal Reserve's autonomy, is causing oil investors to remain cautious," said Priyanka Sachdeva, senior market analyst with Phillip Nova.
Meanwhile, the European Union on Tuesday adopted a 15th package of sanctions against Russia over its invasion of Ukraine, adding an additional 33 vessels from Russia's shadow fleet used for transporting crude or petroleum products. Britain also sanctioned 20 ships for carrying illicit Russian oil.
The fresh sanctions could stoke further oil price volatility though so far they have not succeeded in shutting Russia out of the global oil trade.
