Oil falls after an unexpected increase in US crude inventories

Oil fell in early Asian trading on Wednesday, trimming its gains for two consecutive days after a report showed US crude inventories rose unexpectedly last week in a sign of possible weak demand for fuel.

Brent crude futures fell 48 cents, or 0.6 percent, to $74.84 a barrel at 0203 GMT. It had risen by more than 3 percent this week.

West Texas Intermediate crude futures fell 47 cents, or 0.7 percent, to $69.20.

Sources said that data released by the American Petroleum Institute on Tuesday showed that crude stocks in the United States rose by about 3.3 million barrels in the week ending March 17.

The huge increase contradicted the expectations of eight analysts polled by Reuters for a decline in stocks by about 1.6 million barrels.

Traders and analysts will be watching data from the US Energy Information Administration on Wednesday to see if it confirms signs of weak demand for crude oil.

Meanwhile, markets await the outcome of the US Federal Reserve’s meeting on Wednesday, in what is widely seen as the most difficult monetary policy stance the Fed has faced in recent times.

After the meeting, US Central Bank President Jerome Powell is expected to reveal new economic forecasts and the bank’s path to raising interest rates.

While the market expects the Federal Reserve to raise interest rates by 25 basis points on Wednesday, central bank watchers say it may pause further hikes or delay issuance of new economic forecasts due to turmoil in the global banking sector.

A pause in raising interest rates may help revive economic activity and thus increase demand for fuel.

Oil prices recorded their sharpest drop in months last week, after the collapse of major US banks beginning on March 10 and a crisis at European bank Credit Suisse culminated in an emergency bailout over the weekend.

OPEC+ officials, hedge fund managers and oil market participants have described the recent drop in oil prices as a result of speculation and insist that increased demand will push prices higher in the coming months.