Oil tumbled after a nearly 6 percent gain in four days as investors looked to the US interest rate decision.
US crude was trading at $79 a barrel after closing at the highest level since mid-April. Gains were bolstered by signs that the global market was beginning to contract, and Chinese leadership moves rekindled growth in the world’s largest importer of crude oil after its recovery stalled.
The Fed is expected to raise borrowing costs to a 22-year high on Wednesday, while also maintaining a tightening trend that signals the possibility of another upward move later this year. Higher rates risk slowing the economy and hurting energy consumption.
Crude oil rose this month as supply constraints by OPEC+ members Saudi Arabia and Russia and Moscow’s exports slumped. This helped prices close above its 200-day moving average this week, while US crude’s momentary spread slipped deeper back, making it a bullish pattern signaling tight supply.
The industry-funded American Petroleum Institute reported a mixed picture, pointing to a 1.3 million-barrel increase in crude inventories last week, but a 2.3 million-barrel drop at its major oil storage center in Cushing, Oklahoma. Data from AlphaBBL also pointed to a drop in Cushing. Official figures will be released on Wednesday.