Oil dips as potential Fed rate hike overshadows falling stocks

Oil dropped on Wednesday as the market weighed potential interest rate hikes from the U.S. Federal Reserve that could slow growth and dampen oil consumption, offsetting falling U.S. inventories and strong Chinese economic data.

Brent crude futures shed 35 cents, or 0.4%, to $84.42 a barrel as at 0641 GMT. West Texas Intermediate U.S. crude fell 33 cents, also 0.4%, to $80.53 a barrel.

The U.S. central bank likely has one more interest rate rise in store to fight inflation, Atlanta Fed President Raphael Bostic said on Tuesday.

Markets are pricing in an 86% chance the Fed raises rates by 25 basis points at its May policy meeting.

In Europe, European Central Bank officials are also wary of inflation and suggesting interest rates must keep rising.

Oil prices received a lift from an industry report showing U.S. crude stocks fell about 2.68 million barrels in the week ended April 14, market participants citing American Petroleum Institute figures said on Tuesday. Inventories of gasoline and distillate also fell last week, the people said.

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