By Georgina McCartney
HOUSTON (Reuters) -Oil prices rose on Wednesday after U.S. crude inventories fell and as investors eyed a potential interest rate cut by the U.S. Federal Reserve while weighing its projections for 2025.
Brent futures shot up more than $1 at their session high, and were up 86 cents, or 1.18%, to $74.02 a barrel at 11:57 a.m. ET. U.S. West Texas Intermediate crude was up $1.06, or 1.51%, to $71.14.
U.S. crude stocks and distillate inventories fell while gasoline inventories rose in the week ending Dec. 13, the Energy Information Administration (EIA) said on Wednesday.
Meanwhile, the Fed is expected to cut rates by a quarter point, and to signal a cautious approach to loosening monetary policy next year.
"While the market has a 25-basis point cut baked in, investors will look for what the forward thinking is from the Fed and how aggressive they will be in 2025," StoneX analyst, Alex Hodes said in a note.
Between a new policy statement, the projections and Powell's press conference, the net result is likely to be "a hawkish cut" with a slower pace of reductions to come, Diane Swonk, chief economist at KPMG, wrote ahead of this week's meeting.
Lower rates decrease borrowing costs, which can boost economic growth and demand for oil.
The U.S. central bank will release its policy statement at 2 p.m. ET (1900 GMT), followed by remarks from Chair Jerome Powell.
Uncertainty on how aggressively the U.S. Fed will cut interest rates next year is likely capping oil's upside for now, said UBS analyst Giovanni Staunovo.