US crude dips for 1st time in 3 days as Fed decision looms

US oil prices fell in Asian trade on Wednesday, snapping two days of gains that pulled crude back from testing 11-year lows, as investors awaited the outcome of a Federal Reserve meeting that will likely raise interest rates.

West Texas Intermediate fell 50 cents to USD 36.85 a barrel by 0048 GMT after rising more than USD 1 on Tuesday. It fell to USD 34.53 on Monday, the lowest since it financial crisis bottom of USD 32.40, before ending the day higher.

Brent had yet to trade. The contract settled up 53 cents at USD 38.45 a barrel on Tuesday, closing higher for the first in eight days.

On Monday, the global oil benchmark came within 14 cents of a December 2008 bottom of USD 36.20, unleashing a surge of buying support.

The Federal Reserve on Tuesday started a two-day meeting where it is expected to raise rates eight years after a devastating recession opened an era of loose US monetary policy.

A rise in rates is typically negative for oil prices because a hike is likely to prop up the greenback, making crude contracts more expensive as they are denominated in dollars.

Markets are already prepared for a 25 basis point increase but will be closely watching the Fed's policy statement for indications of where rates will go next year.

In a further sign of oversupply in the market, data released late on Tuesday by the industry group, American Petroleum Institute, showed a surprise build of 2.3 million barrels in US crude stockpiles last week.

A Reuters poll of analysts had forecast a 1.4 million-barrel draw instead. Official inventory data is due on Wednesday from the US Energy Information Administration.