Oil prices slipped on Thursday ahead of an expected rate hike by the Federal Reserve, but found a floor as market participants eyed falling U.S. crude stockpiles and upcoming European sanctions on Russian barrels.

Brent crude dipped 56 cents, or 0.6%, to $94.09 a barrel by 1027 GMT, while U.S. West Texas Intermediate (WTI) crude was down 53 cents, or 0.6%, at $87.84 per barrel.

U.S. crude oil stocks fell about 6.5 million barrels for the week ended Oct. 28, according to market sources citing American Petroleum Institute figures.

At the same time, gasoline inventories fell 2.6 million barrels, more than expected. Official data is due at 1430 GMT.

China’s zero-COVID policy has been a key factor in keeping a lid on oil prices as repeated lockdowns have slowed growth and pared oil demand in the world’s second-largest economy.

An unverified note on social media said the Chinese government was going to consider ways to relax COVID-19 rules from next March, potentially boosting demand in the world’s No.2 oil user.

Meanwhile, the dollar fell from Tuesday’s highs as investors braced for the U.S. Federal Reserve’s policy decision at 1800 GMT, with many hoping for signs of a slowdown in future rate hikes.

A weaker dollar makes oil cheaper for holders of other currencies.

The potential disruption from the European Union embargo on Russian oil that is set to start on Dec. 5 may also be pushing prices higher. The ban, a reaction to Russia’s invasion of Ukraine, will be followed by a halt on oil product imports in February.

“Despite slowing economies and China’s COVID-19 woes, the odds are that the lack of supply will gain the upper hand over demand concerns in the short term. Therefore, expect oil prices to close out this year heading into triple-digit territory,” PVM analyst Stephen Brennock said.
Source: Reuters