The threat of interest rate increases and ample Russian crude flows outweighed the demand recovery expectations from China, which resulted in a drop in oil prices on Tuesday.
In March, crude futures fell 25 cents to $84.65 per barrel by 0715 GMT. The March contract expires on Tuesday and the more heavily traded April contract fell by 38 cents, or 0.45 per cent, to $84.12.
The U.S. West Texas Intermediate WTI crude futures dropped by 44 cents, or 0.56 per cent, to $77.46 a barrel.
The oil markets are facing downside pressure as risk-off trades prevail ahead of the Fed meeting, along with a strengthened USD, according to CMC Markets analyst Tina Teng.
She said that Russia's exports seem unaffected by sanctions despite China's reopening.
The Bank of England and the European Central Bank expect to raise interest rates by 25 basis points on Wednesday, with a half-point increase by the Bank of England and the European Central Bank the following day. Higher rates could slow the global economy and weaken oil demand.
The market is expected to hold a virtual meeting on February 1 at 1100 GMT of the Ministers of the Organization of the Petroleum Exporting Countries, OPEC and others, a group known as the OPEC The panel will recommend keeping the oil producer group's current output policy unchanged when it meets this week, five OPEC delegates told Reuters on Monday.
From November to the end of 2023,OPEC agreed to reduce its production target by 2 million barrels per day bpd, about 2 per cent of world demand.
Russia continues to supply the global market with its oil despite a European Union ban and G 7 price cap imposed over its invasion of Ukraine, which pressured prices.
There was a boost to decreases in demand from China after growth in the country's economic activity.
China's official purchasing managers' index, PMI, which measures manufacturing activity, rose to 50.1 in January from 47.0 in December, the National Bureau of Statistics NBS said on Tuesday.
The International Monetary Fund IMF raised its global growth outlook slightly in 2023 due to surprisingly resilient demand in the United States and Europe, an easing of energy costs and the reopening of China's economy after Beijing abandoned its strict COVID 19 restrictions.