A worker holds a nozzle to pump petrol into a vehicle at a fuel station in Mumbai
A worker holds a nozzle to pump petrol into a vehicle at a fuel station in Mumbai, India, May 21, 2018. Reuters

Oil drifted lower on Wednesday as the market weighed potential interest rate hikes from the Federal Reserve that could slow growth and dampen oil consumption, offsetting falling U.S. inventories and strong Chinese economic data.

Brent crude futures shed 7 cents to $84.70 a barrel at 0320 GMT. West Texas Intermediate U.S. crude was down 5 cents to $80.81 a barrel.

The U.S. Federal Reserve likely has one more interest rate rise in store to fight inflation, Atlanta Fed President Raphael Bostic said on Tuesday.

Markets are pricing an 86% chance the Fed raises rates by 25 basis points at the May meeting.

Prices had got a lift from an industry report showing that U.S. crude stocks fell by about 2.68 million barrels in the week ended April 14, according to market sources citing American Petroleum Institute figures on Tuesday. [API/S] Inventories of gasoline and distillate also fell last week, the sources said.

The official inventory report by the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due at 1430 GMT on Wednesday.

Meanwhile, the economy of top crude oil importer China grew by a faster-than-expected 4.5% in the first quarter, while the country's oil refinery throughput rose to record levels in March, data showed.

"The market has been impatient on the impact China's reopening has had on demand. The fact that its economy is growing at its fastest pace in a year should buoyed well for demand in coming months," said Brian Martin and Daniel Hynes, analysts from ANZ Research, in a note.

"However, this is being offset by weakness elsewhere," they said, referring to the plunging refining margins for diesel and jet fuel that suggests global demand is softening.

Distillates and gasoline cracks from Asia to Europe are weak amidst sluggish demand and increasing product supplies in the market.

Adding more pressure on the oil benchmarks is that Asian refiners continues to seize Russian crude in April. India and China have snapped up the vast majority of Russian oil so far in April at prices above the Western price cap of $60 per barrel, according to traders and Reuters calculations.