Oil prices headed lower on Wednesday, pressured by a third consecutive weekly climb in U.S. crude supplies, as well as expectations for a Federal Reserve interest-rate hike that may slow demand for energy.

Prices gave up early gains from the possibility of an even more protracted war in Ukraine, after Russian President Vladimir Putin announced a partial draft of citizens, in a sign that the seven-month war in Ukraine may be escalating the pressure on global commodity supplies.

Price action
  • West Texas Intermediate crude for November delivery CL.1, -1.80% CLX22, -1.20% fell 42 cents, or 0.5%, to $83.52 a barrel. The October contract CLV22, which expired at the end of Tuesday’s session, fell $1.28, or 1.5%, to settle at $84.45 a barrel on the New York Mercantile Exchange on Tuesday, the lowest finish since Sept. 8, according to Dow Jones Market Data.
  • November Brent crude BRN00, -1.08%   BRNX22, -1.08% the global benchmark, declined by 11 cents, or 0.1%, to $90.51 a barrel on ICE Futures Europe. A day earlier, Brent fell by $1.38, or 1.5%, to $90.62 a barrel, also settling at its lowest since Sept. 8.
  • Back on Nymex, October gasoline  RBV22, +0.20% was up 0.3% to $2.4535 a gallon, while October heating oil  HOV22, -2.86% lost 2.4% at $3.2927 a gallon.
  • October natural gas  NGV22, -0.69% fell 1.4% to $7.608 per million British thermal units.
Market drivers

Oil prices have taken a hit as a result of the Energy Information Administration report, but “remain at the mercy” of the Fed rate decision later Wednesday, said Matt Smith, lead oil analyst, Americas, at Kpler.

Oil traders will be watching closely for a Fed interest-rate hike of at least 75 basis points, when the central bank’s two-day meeting wraps on Wednesday. Some expect the Fed could stretch to a hike of 100 basis points.

The central bank is expected to announce its policy decision at 2 p.m. Eastern time, a half hour before the settlement for Nymex oil futures.

Read: Fed to put a ‘firm foot on the brake pedal’ this week

Oil prices have struggled in recent months over concerns that the Fed’s battle to bring down high interest rates will trigger a global economic slowdown that could harm demand.

Meanwhile, Russian president early on Wednesday announced the ordering up of 300,000 reservists, and vowed to use all means necessary to defend territories, adding that this was “not a bluff.”

Putin’s announcement came a day after Russian-controlled regions in eastern and southern Ukraine announced they would hold votes to become integral parts of the former Soviet Union. Moscow was warned about its plans for those referendum at the annual gathering of the U.N. General Assembly in New York.

“In the best case this makes any peace deal that much more of a distant prospect, considering that Ukraine won’t give up any of these lands and Russia will certainly not cease its claim on the territory after it has been strengthened by a ‘popular vote’,” said Bas van Geffen, senior macro strategist at Rabobank, in a note to clients on Wednesday.

Read: German government agrees deal to nationalizes Uniper amid fallout from Russia’s war in Ukraine

“In the worst case, this is exactly the pretext that Putin needs for the deployment of nuclear or chemical weapons when Ukraine pushes ahead with its counteroffensive – or at the very least to further increase such threats to the West, adding another bout of uncertainty to the geopolitical mix,” said van Geffen.

Analysts have expressed concerns that an extended conflict will only weigh further on commodity supplies, including oil and natural gas.

Supply data

On Wednesday, the Energy Information Administration reported that U.S. crude inventories rose by 1.1 million barrels for the week ended Sept. 16.

That marked a third weekly rise in a row for crude supplies, based on EIA data. On average, analysts expected a climb of 2.1 million barrels, according to a poll conducted by S&P Global Commodity Insights. Late Tuesday, data from the American Petroleum Institute reportedly revealed a weekly increase of 1.035 million barrels.

“A rise in refining activity and strong crude exports have been offset by a jump in imports and a near 7 million-barrel [Strategic Petroleum Reserve] release,” resulting in a minor build to U.S. crude stocks, said Kpler’s Smith.

Crude stocks at the Cushing, Okla., Nymex delivery hub edged up by 400,000 barrels for the week, the EIA said, while stocks in the SPR were down by 6.9 million barrels at 427.2 million barrels last week.

“The increase in refining activity has combined with weaker implied demand to usher in a build for gasoline, while distillates also showed a build as higher production helped offset higher implied demand,” Smith said.

The EIA reported weekly increases of 1.6 million barrels for gasoline and 1.2 million barrels for distillates. The S&P Global Commodity Insights survey had called for inventory declines of 1.6 million barrels for gasoline and 600,000 barrels for distillates.