-- Oil prices crept lower on Wednesday after a strong rally in the prior session as markets hunkered down ahead of a closely-watched Federal Reserve interest rate decision, while industry data pointed to a build in U.S. inventories. 

Crude prices settled over 3% higher on Tuesday after the People’s Bank of China cut a short-term lending rate for the first time in 10 months, bolstering hopes that the government will roll out more stimulus measures to support a slowing economic recovery in the world’s largest oil importer. 

Soft U.S. also helped support oil, sparking bets that the Fed will have more reason to pause its rate hike cycle at the later in the day. But given that the reading was still above the Fed’s annual target range, markets remained on edge over any hawkish signals. 

fell 0.2% to $74.13 a barrel, while fell 0.2% to $69.19 a barrel by 22:09 ET (02:09 GMT). 

U.S. inventories mark unexpected build

Data from the showed that crude inventories unexpectedly grew by about 1 million barrels in the week to June 9, heralding a similar reading from government data due later in the day.

A rise in gasoline inventories in particular raised concerns over weakening fuel demand in the country, even as the travel-heavy summer season kicks off. 

Concerns over slowing global demand, especially as economic conditions worsen, have weighed heavily on crude prices this year, and have largely offset reductions in supply by the Organization of Petroleum Exporting Countries.

The OPEC still maintained its outlook that demand will improve this year in a released on Tuesday.

Fed, central banks in focus 

Crude markets were now awaiting an interest rate decision by the Fed later in the day. While a bulk of investors expect the central bank to pause its rate hike cycle, the possibility of a surprise rate hike kept traders cautious.

A Fed pause is likely to send positive signals to crude markets, while also pushing the dollar lower. 

Apart from the Fed, the is also expected to potentially hike interest rates on Thursday, as inflation remained elevated in the region this year, while the is set to maintain its ultra-loose policy on Friday.

Fears of rising interest rates weighed on oil prices this year, amid concerns that restrictive monetary policy will dent economic activity and in turn hurt oil demand. Brent and WTI contracts are trading down about 10% so far in 2023.