Oil steadied near $90 on Wednesday after Goldman Sachs sharply raised its outlook for crude prices next year, offsetting concerns over a flagging U.S. economy.
U.S. light, sweet crude futures fell six cents to $89.96 a barrel by 0530 EST, after climbing over $2 in the previous session. London Brent crude traded two cents lower at $89.97.
Goldman Sachs, the most active investment bank in energy markets, now expects U.S. crude to average $95 a barrel in 2008, up $10 from the previous projection.
It said a cyclically stronger market in the second half of next year could push the price to $105 by the end of 2008.
The forecast helped pare losses earlier in the session on worries a timid interest rate cut would not be enough to bolster the economy of the world's largest energy consumer.
The Fed's quarter-point cut in interest rates was accompanied with a hawkish statement, contrary to some expectations for a steeper discount rate cut to help strained money markets at year-end.
Markets across Asia fell on the move, with the benchmark Nikkei average down 2 percent, while the MSCI index of other Asian stocks dropped 2.2 percent.
Oil prices also came under pressure as U.S. energy supply infrastructure affected by harsh winter weather began to resume operations.
The interest rate cut was disappointing but the market really eased on news that operations restarted at Cushing, said Koo Ja-kwon, crude oil analyst at Korea National Oil Corp.
Energy companies restarted pipelines and storage terminals in the U.S. heartland on Tuesday after a deadly ice storm knocked out power around the nation's most important oil hub at Cushing, Oklahoma.
The storm clipped power to more than 800,000 customers in the U.S. Plains region and disrupted oil flows to Cushing, the delivery point for the New York Mercantile Exchange crude contract.
Traders are closely watching the U.S. inventory data to be released at 10:30 a.m. EST, which is expected to show a 200,000-barrel decrease in crude stocks last week due to a brief outage on the Enbridge Pipeline system from Canada, according to a Reuters poll of analysts.
Analysts also expected a 500,000-barrel increase in distillate stocks and a 1.3 million-barrel rise in gasoline stocks.
(Reporting by Angela Moon in Seoul and Randy Fabi in London; editing by James Jukwey)