Oil was down on Wednesday as the US Federal Reserve cut interest rates as expected, while data showed an increase in US diesel stockpiles stoked worries about demand.
Brent crude traded at $68.22 per barrel after losing 52 cents or 0.76 per cent, and the US West Texas Intermediate crude closed at $64.05 per barrel after it gave up 47 cents or 0.73 per cent.
US Federal Reserve on Wednesday cut interest rates by a quarter of a percentage point as expected and indicated it will steadily lower borrowing costs for the rest of this year.
The US central bank reduced interest rates on Wednesday for the first time since December by a quarter of a percentage point to the 4.00 per cent-4.25 per cent range, and indicated more cuts would follow at meetings in October and December.
The decision moves in a direction called for by President Donald Trump, but falls far short of the steep cuts in borrowing costs that he has demanded.
Growing signs of weakness in the labour market are the main reason why the Federal Reserve has decided to cut borrowing costs for the first time in the current year, coupled with the predictions that tariff-induced inflation is going to be short-lived.
US crude inventories fell sharply last week with a jump in exports and a sharp decline in imports, the Energy Information Administration said on Wednesday.
Crude oil inventories in the US decreased by 9.3 million barrels during the week ending September 12, after adding 3.9 million barrels in the week prior.
The draw is one of the largest weekly draws seen over the last few years, and brings commercial stockpiles to 415.4 million barrels according to government data, which is 5 per cent below the five-year average for this time of year.
For total motor gasoline, the EIA reported a decrease of 2.3 million barrels, after the week prior’s 1.5-million-barrel increase. The most recent figures showed average daily gasoline production decreasing to 9.4 million barrels. For middle distillates, inventories increased by 4 million barrels, with production decreasing to 5 million barrels daily. Distillate inventories had increased by 4.7 million barrels in the week prior and despite to weeks of large gains, are still 8 per cent below the five-year average for this time of year.
Pressure came on prices from the supply front as Kazakhstan resumed oil supplies through the Baku-Tbilisi-Ceyhan pipeline on September 13, according to its state energy company on Wednesday. Supplies were suspended last month because of contamination issues.
Russian oil supply risks were also in focus after Ukraine’s attacks on Russia’s energy infrastructure intensified in recent weeks.