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Ammon News - 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.

The official inventory report by the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due to be released at 1430 GMT on Wednesday.

Meanwhile, the economy of top crude oil importer China grew by a faster-than-expected 4.5% in the first quarter, while the country's oil refinery throughput rose to record levels in March, data showed.

"The market has been impatient on the impact China's reopening has had on demand. The fact that its economy is growing at its fastest pace in a year should bode well for demand in coming months," ANZ Research analysts Brian Martin and Daniel Hynes said in a client note.

"However, this is being offset by weakness elsewhere," they said, referring to plunging refining margins for diesel and jet fuel that indicate global demand is softening.

Distillates and gasoline cracks from Asia to Europe are weak amidst sluggish demand and increasing product supplies in the market.

Adding more pressure on oil benchmarks is Asian refiners continuing to seize Russian crude in April. India and China have snapped up the vast majority of Russian oil so far in April at prices above the Western price cap of $60 per barrel, according to traders and Reuters calculations.

Reuters