IDC Zubair oilfield in Basra
A general view shows an oil rig used in drilling at the Zubair oilfield in Basra, Iraq, July 5, 2022. Reuters

Oil prices were mostly steady on Wednesday as the market waited for U.S. inflation data later in the day that will likely influence the Federal Reserve's policy on future interest rate hikes.

Brent crude edged up 3 cents to $85.64 a barrel as of 0403 GMT, while U.S. West Texas Intermediate dipped 2 cents to $81.51 a barrel.

Prices had risen about 2% on Tuesday amid optimism that the U.S. Federal Reserve is getting closer to ending its cycle of interest rate hikes, making dollar-priced oil cheaper for buyers holding other currencies.

The U.S. consumer price index is expected to show March core inflation rose 0.4% on a monthly basis and 5.6% year-on-year, according to a Reuters poll of economists.

Philadelphia Federal Reserve Bank President Patrick Harker said on Tuesday that he feels the U.S. central bank may soon be done raising interest rates, while Minneapolis Federal Reserve Bank President Neel Kashkari said he believes inflation, now at a rate of 5% by the Fed's preferred measure, will get to "the mid-threes" by the end of this year.

Yeap Jun Rong, a market analyst at IG said in a note to clients, however, that any "higher-than-expected inflation print could lay the ground for another 25 basis-point rate hike in June".

Meanwhile, data from the American Petroleum Institute (API) showed crude inventories rose by about 380,000 barrels in the week ended April 7, sources said, against forecasts from eight analysts polled by Reuters for a decline of 600,000 barrels.

At the same time, gasoline inventories rose by about 450,000 barrels, according to the API report, while analysts had expected a 1.6 million-barrel drawdown.

The U.S. government will release its stockpile data at 10:30 a.m. (1430 GMT) on Wednesday.

In another negative for oil demand, the International Monetary Fund on Tuesday trimmed its 2023 global growth outlook, citing the impact of higher interest rates.

In addition to the inflation data, the market is waiting for more clarity on oil demand and supply with monthly reports from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency due on Thursday and Friday respectively.

The U.S. Energy Information Administration on Tuesday cut its forecast for oil production by OPEC countries by 0.5 million barrels-per-day for the rest of 2023 and cut its 2023 world oil demand growth forecast by 40,000 bpd.