Oil rally loses steam in Asia ahead of Fed decision

SINGAPORE - Oil prices eased in Asia Thursday, a day after surging on news of a sharp decline in US crude stockpiles, while investors are also treading carefully ahead of a US Federal Reserve interest rate decision later in the day.

US benchmark West Texas Intermediate (WTI) for delivery in October dipped 14 cents to US$47.01 (S$65.73) a barrel and Brent crude for November edged down four cents to US$49.71.

On Wednesday WTI surged almost six percent and Brent jumped more than four percent after the US Department of Energy revealed a 2.1 million barrel drop in inventories.

That included a 1.9 million barrel decline at the Cushing, Oklahoma trading hub, indicating stronger demand in the world's top oil consumer. The report also said US oil production fell for the sixth straight week.

Attention is now focused on Washington where the Fed will make an announcement on borrowing costs, with some analyst opinions split on whether it will begin lift-off on Thursday or wait until December.

"The market is keeping a close eye on the two-day Federal Open Market Committee meeting... as the Fed decides whether to raise interest rate for the first time in years," said Sanjeev Gupta, head of the Asia Pacific oil and gas practice at professional services firm EY.

Fed chief Janet Yellen has said she expects an increase by the end of the year but recent turmoil in global markets caused by concerns about China's economy have made policymakers' decision-making complicated.

A rise in US interest rates tends to bolster the dollar, making dollar-priced oil more expensive for holders of weaker currencies, in turn hurting demand and prices.