By Georgina McCartney
HOUSTON (Reuters) -Oil prices edged higher on Wednesday after inventories fell and the U.S. Federal Reserve cut interest rates as expected, but gains were limited as the Fed signaled the pace of cuts would slow.
futures rose 20 cents, or 0.27%, to $73.39 a barrel. U.S. West Texas Intermediate crude rose 50 cents, or 0.71%, to $70.58. Both benchmarks retreated after gains of more than $1 per barrel at session highs.
U.S. crude oil and distillate inventories fell while gasoline inventories rose in the week ended Dec. 13, the Energy Information Administration said Wednesday.
Total (EPA:) Product supplied, a measure of demand, was 20.8 million barrels per day, an increase of 662,000 barrels per day from the previous week.
“The market seems to have turned a corner from all the negativity we saw a few weeks ago as there is more optimism about demand,” said Phil Flynn, senior analyst at Price Futures Group.
The US Federal Reserve has cut interest rates and indicated that it will slow the pace at which borrowing costs will fall further, given relatively stable unemployment and little recent improvement in inflation.
Both Brent and US crude futures pared gains and turned negative in post-settlement trading after the Fed’s announcement, which was followed by hitting a year-to-date high of 108,156 .
A stronger dollar makes oil more expensive in other countries, which can reduce demand.
US central bankers predict they will cut interest rates by just two quarters of a percentage point by the end of 2025.
Oil investors had already made a 25 basis point cut that would be announced on Wednesday, StoneX analyst Alex Hodes said in a note, and were watching more eagerly the Fed’s prospects for future cuts.
Lower interest rates lower financing costs, which can stimulate economic growth and oil demand.
