By Rowena Edwards
LONDON (Reuters) -Oil prices stabilised on Wednesday following declines earlier as the U.S. dollar eased ahead of a crucial interest rate decision by the U.S. Federal Reserve.
Brent crude futures, which have risen by around 3% this week, were up 18 cents or 0.24%, at $75.50 a barrel at 1331 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 17 cents, or 0.24%, at $69.84.
“With risk aversion declining, positive equity markets, and a weaker dollar, oil has managed to recover further,” UBS analyst Giovanni Staunovo said.
A weaker dollar boosts oil demand as it makes the commodity cheaper for those holding other currencies.
Oil markets will be seeking direction from the U.S. Fed’s Federal Open Market Committee (FOMC), which announces its decision on interest rates at 1800 GMT.
The expected rate hike of 25 basis points is a turnaround from the steep 50 basis point rate rise anticipated before the recent banking turmoil, triggered by the collapse of two regional banks.
“It would be a big shock if the Fed reverted back to larger rate hikes now considering everything that’s happened this past couple of weeks,” said Craig Erlam, senior market analyst at OANDA.
Oil prices dropped earlier in the day following an unexpected rise in UK inflation in February, raising fears of further interest rate hikes a day before the Bank of England announces its latest interest rate decision.
Data from the American Petroleum Institute on Tuesday also called demand into question after it showed an unexpected rise in U.S. crude inventories last week, sources said, defying analyst estimates of a decline.
Official data from the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due at 10:30 a.m. (1430 GMT) on Wednesday.
Brent prices last week hit their lowest since 2021 on concern that the rout in bank shares could trigger a global recession and cut fuel demand.
An emergency rescue of Credit Suisse over the weekend helped revive oil prices.
OPEC+ is likely to stick to its deal on output cuts of 2 million barrels per day (bpd) until the end of the year, despite the plunge in crude prices, three delegates from the producer group told Reuters.
(Reporting by Rowena Edwards in London; Additional reporting by Sudarshan Varadhan in Singapore and Andrew Hayley in Beijing; Editing by Jan Harvey and Emelia Sithole-Matarise)