Oil settles up after US crude stocks fall

Oil prices settled higher after U.S. crude inventories fell and the U.S. Federal Reserve cut interest rates as expected, but gains were capped as the Fed signalled it would slow the pace of cuts.

Brent futures settled up to $73.39 a barrel. U.S. West Texas Intermediate crude settled up to $70.58. Both benchmarks retreated from gains of more than $1 a barrel at session highs.

U.S. crude stocks and distillate inventories fell while gasoline inventories rose in the week ending Dec. 13, the Energy Information Administration said.

Total product supplied, a proxy for demand, was 20.8 million barrels per day, up 662,000 bpd from the prior week.

"The market seems to have turned a corner from all the negativity we saw a couple weeks ago as there is more optimism about demand," said Phil Flynn, a senior analyst for Price Futures Group.

The U.S. Federal Reserve cut interest rates and signalled it will slow the pace at which borrowing costs fall further, given a relatively stable unemployment rate and little recent improvement in inflation.

U.S. central bankers project they will make just two quarter-percentage-point rate reductions by the end of 2025.