© Reuters. A person uses a petrol pump, as the price of petrol rises, in Lisbon, Portugal, March 7, 2022. Picture taken March 7, 2022. REUTERS/Pedro Nunes/File Photo

By Robert Harvey

LONDON (Reuters) -Oil prices fell on Wednesday ahead of the U.S. Federal Reserve’s interest rate decision, with investors uncertain when peak rates will be hit and how much of an impact it will have on energy demand.

Investors are awaiting the Fed’s interest rate decision at 1800 GMT on Wednesday to assess the outlook for economic growth and fuel demand. The Fed is widely expected to keep interest rates on hold, but the focus will be on its projected policy path, which is unclear.

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

Global benchmark futures fell by 69 cents, or 0.73%, to $93.65 a barrel by 1152 GMT, paring losses after trading $1.58 lower at their intra-day low on Wednesday.

U.S. West Texas Intermediate crude futures shed 0.79%, or 72 cents, to $90.48 a barrel. The October WTI contract expires on Wednesday and the more active November contract was down 73 cents, or 0.81%, to $89.75 a barrel at 1152 GMT.

Prices fell despite oil stockpiles falling last week by about 5.25 million barrels, according to market sources citing American Petroleum Institute figures on Tuesday. Analysts in a Reuters poll had expected a 2.2 million-barrel decline.

“Barring any unpleasant surprise, attention will likely return to the perceived supply deficit once interest rate decisions are out of the way and reaching the $100/bbl milestone remains a not-so-distant possibility,” said Tamas Varga, analyst at oil broker PVM.

“We have nudged up our 12-month ahead Brent forecast from $93 a barrel to $100 a barrel as we now expect modestly sharper inventory draws. The key reason is that significantly lower OPEC supply and higher demand more than offset significantly higher US supply,” said Goldman Sachs analysts in a Wednesday note.

Elsewhere, data from the U.K. 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.