Oil retreats awaiting key US Federal Reserve rate decision

Oil prices retreated on Wednesday awaiting the US Federal Reserve's interest rate decision, with investors remaining on the tenterhooks over when would the rates peak and what impact would they have on demand.

A US Energy Information Administration (EIA) report showed a weekly draw in crude stockpiles that was in line with analysts' estimates.

Brent futures for November delivery fell 46 cents, or 0.5%, to $93.88 a barrel by 12:02 p.m. EDT (1602 GMT). 

US West Texas Intermediate (WTI) crude for October delivery fell 20 cents, or 0.2%, to $91.00.

The WTI contract for October expires on Wednesday. WTI crude futures for November, which will soon be the US front-month, were up about 18 cents to $90.30.

Despite the small price decline, both Brent and WTI were in technically overbought territory for a 14th straight day, which would be the longest streak for Brent since 2012 and WTI since 2018.

Investors were awaiting the Fed's interest rate decision at 2:00 p.m. EDT (1800 GMT) to assess the outlook for economic growth and fuel demand.

 The Fed is widely expected to keep interest rates steady, but the focus will be on its projected policy path.

"The oil rally is taking a little break as every trader awaits a pivotal Fed decision that might tilt the scales of whether the US economy has a soft or hard landing," said Edward Moya, senior market analyst at data and analytics firm OANDA.

US crude stocks fell last week, driven by strong crude oil exports, while gasoline and diesel inventories drew down as refiners began annual autumn maintenance, the US Energy Information Administration said on Wednesday.

Crude inventories fell by 2.1 million barrels in the week ending Sept. 15 to 418.5 million barrels, compared with analysts' expectations in a Reuters poll for a 2.2 million-barrel drop.

US gasoline futures slid to their lowest in almost two weeks, cutting the gasoline crack spread, a measure of refining profit margins, to its lowest since December 2022.

In the UK, data showed a surprise drop in inflation in August, as the consumer price index fell by 0.1 percentage points to 6.7%, its lowest since February 2022. 

Goldman Sachs said it expects the Bank of England to keep interest rates unchanged on Thursday as a result of the fall.

In Japan, exports fell in August for a second straight month, weighed by declines in China's demand for steel and heavy oil and stoking fears of a downturn in the face of elevated global interest rates.

Interest rate hikes to tame inflation can slow economic growth and reduce oil demand.