Price action

• West Texas Intermediate crude for July delivery
  CL.1,
  -0.45%

  CL00,
  -0.45%

  CLN22,
  -0.45%
  fell $1.25, or 1.1%, to $117.68 a barrel on the New York Mercantile Exchange.

• August Brent crude
  BRN00,
  -0.35%

  BRNQ22,
  -0.35%,
  the global benchmark, lost $1.12, or 0.9%, to $120.05 a barrel on ICE Futures Europe.

• Back on Nymex, July gasoline
  RBN22,
  -0.91%
  fell 1.1% to $3.9487 a gallon, while July heating oil
  HON22,
  +0.27%
  was off 0.5% at $4.3702 a gallon.

• July natural-gas futures
  NGN22,
  +4.15%
  rose 2.2% to $7.34 per million British thermal units, after ending Tuesday at a five-week low.

Market drivers

Oil was extending losses seen after crude futures turned south in Monday’s session. While a number of factors were cited as a drag on crude — including optimistic remarks around the Iran nuclear deal, a waiver extension allowing U.S. banks to process Russian energy transactions, and a report that a U.S. senator intends to propose a federal surtax on certain oil companies in a move to curb inflation — some analysts saw the softness as largely tied to jitters over the Fed.

“It appears that market participants got cold feet ahead of today’s Fed decision, as a stronger tightening of monetary policy could have negative effects on oil demand,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.

The Federal Reserve is widely expected to lift the fed-funds rate by 75 basis points, or three-quarters of a percentage point, when it concludes its two-day policy meeting at 2 p.m. Eastern, though Fed watchers say such an outsize move isn’t assured.

The International Energy Agency on Wednesday said it expects global demand for oil to rise above pre-pandemic levels next year following three years of COVID-19 lockdowns and the economic shock of the Ukraine war. Much of the growth in demand next year will be driven by China, as it emerges from stop-start COVID-19 lockdowns, while developed economies are expected to contend with a worsening economic outlook and rampant inflation, the Paris-based agency said in its monthly report.

President Joe Biden on Wednesday wrote letters to U.S. oil refiners, calling on them to produce more gasoline and diesel and saying their profits have tripled during a time of war between Russia and Ukraine as Americans struggle with record high prices at the pump.

Natural-gas futures fell Tuesday after Freeport LNG Development said it now expects a resumption of partial operations at its liquefactions plant on Quintana Island on Texas’s Gulf Coast in about 90 days following damage in the wake of an explosion and fire on June 8. Repairs and full plant operations are not expected until late 2022.

U.S. inventories will also be in focus Wednesday. The American Petroleum Institute reported late Tuesday that U.S. crude supplies rose by 736,000 barrels for the week ended June 10, according to sources. The API also reportedly showed a weekly inventory decline of nearly 2.2 million barrels for gasoline, while distillate stockpiles climbed by 234,000 barrels. Oil stocks at the Cushing, Okla., delivery hub were down by 1.1 million barrels last week, sources said.

Inventory data from the Energy Information Administration will be released Wednesday. On average, analysts polled by S&P Global Commodity Insights said the EIA is expected to show crude inventories down by 1.1 million barrels for the week, along with a supply climb of 100,000 barrels for gasoline and fall of 300,000 barrels for distillates.