U.S. oil futures fall as Fed evaluates rate cuts.

Houston U.S. crude oil futures fell on Wednesday after the Federal Reserve decided not to decrease interest rates soon and expanding inventories piled pressure. Brent crude rose 3 cents, or 0.04%, to $83.68 a barrel. WTI fell 33 cents, or 0.42%, to $78.54. Early trade saw both benchmarks lose $1. The Energy Information Administration (EIA) reported 4.2 million barrels of oil inventory growth last week, above experts' projections of 2.74 million.

Unplanned refinery disruptions after a January winter storm and planned plant turnarounds have raised stockpiles for five weeks. “An above-expected rise in U.S. weekly crude inventories has yet again dragged oil futures lower,” independent analyst Gaurav Sharma said.

Last week, U.S. refinery utilization rose 0.9 percentage points to 81.5% of capacity, below the 10-year seasonal average. Last month, refineries had their longest stretch below 83% utilization in nearly three years. "Refiners are still sidelined to a great extent, and not making a real effort to rapidly come out of the shutdowns experienced after the cold snap," said Again Capital partner John Kilduff.

Kilduff said an outage at BP's 435,000-barrel-per-day Whiting refinery in Indiana, the Midwest's largest, had depleted gasoline inventories. The EIA said that gasoline stockpiles fell for a fourth week to 244.2 million barrels, a two-month low and 2% below the five-year normal for this time of year.

“If this pattern continues for the next six to eight weeks, we might see gasoline supplies tighten as we head into the driving season," said Houston-based Lipow Oil Associates president Andrew Lipow. Tuesday's reports that OPEC+ and its allies, led by Russia, may prolong voluntary oil supply curbs into the second quarter may have capped plummeting prices.

After Hamas called on Palestinians to march to Jerusalem's Al-Aqsa Mosque at the start of Ramadan, heightening the stakes in Gaza truce negotiations, which U.S. President Joe Biden believes would be completed by then.

Possible gains were countered by hints that interest rates in the world's largest economy would stay high. Despite a significant drop in inflation pressures, Federal Reserve Bank of New York President John Williams said the central bank has not yet done enough to return inflation to the Fed's 2% objective.

Williams' statement echoed Fed Governor Michelle Bowman's Tuesday comments that she was hesitant to decrease U.S. interest rates due to inflation worries. Higher-for-longer rates might reduce oil consumption and economic growth.

Oil market players will seek for guidance from Thursday's January U.S. personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure and a crucial rate decision determinant.

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