By Yuka Obayashi

TOKYO (Reuters – Oil prices eased Wednesday, as investors book profits ahead of a U.S. Federal Reserve Update. But losses have been limited due to fears that tighter supplies could be caused by tensions in Ukraine or the Middle East.

Futures fell 15 cents or 0.2% to $88.05 per barrel at 0105 GMT. They had risen 2.2% the previous session.

U.S. West Texas Intermediate crude oil futures fell 31 cents or 0.4% to $85.29 per barrel after climbing 2.8% Tuesday.

Hiroyuki Kikukawa is the general manager for research at Nissan Securities (OTC) Securities.

“But the downside is limited because of heightened tensions among Russia and Ukraine as well as the threat to infrastructure within the United Arab Emirates,” said he, noting that oil would likely continue to rise after the Fed update.

Expect the Fed to increase interest rates, reduce its U.S. Treasury bonds holdings and decrease its mortgage-backed securities. This is in line with its plans for a $9 trillion balance.

Last week, oil prices reached seven-year highs due to worries about tightening supplies and tensions between Ukraine and Russia.

On Tuesday, U.S. President Joe Biden stated that he will consider sanctions against President Vladimir Putin in the event of Russia’s invasion of Ukraine. Meanwhile, Western leaders have intensified military preparations to protect Europe from an energy supply shock.

On Monday, the Iran-aligned Houthi group in Yemen launched a missile strike on an Abu Dhabi military base. Officials from the U.S., Emirati and other countries said that they were able to stop the terrorist attack by U.S. Patriot interceptors.

However, gasoline inventories increased for the week ending Jan. 21. Crude inventories fell by 872,000 barrels according to market sources, citing American Petroleum Institute data on Wednesday.

According to Nissan Securities’ Kikukawa, the figures are within analyst estimates.

According to the U.S. Department of Energy, Tuesday’s announcement by the Supply Side Committee indicated that the U.S. Department of Energy had authorized the transfer of 13.4million barrels of crude petroleum from the Strategic Petroleum Reserve (SPR) to seven companies in Biden’s attempt to lower oil prices.