Updates with midday trading

By Arathy Somasekhar

HOUSTON, May 13 (Reuters) - Oil prices edged lower on Wednesday on worries about possible U.S. interest rate hikes while investors focused on a high-stakes summit in Beijing between U.S. President Donald Trump and China's Xi Jinping.

Brent crude futures LCOc1 were down $1.83, or 1.7%, to $105.94 a barrel at 1753 GMT. Meanwhile U.S. West Texas Intermediate futures CLc1 fell 75 cents, or 0.7%, to $101.44.

Boston Federal Reserve President Susan Collins said on Wednesday the U.S. central bank may need to raise interest rates if inflation pressures do not abate, in a sign that the war has begun to weigh on the U.S. economy. Higher oil prices have pushed up fuel costs and economists expect to see second-round effects in the months ahead.

U.S. producer prices posted their biggest increase in four years in April, boosted by soaring costs for goods and services, the latest sign of accelerating inflation amid the war with Iran. In April, U.S. consumer prices rose sharply for a second straight month, producing the largest annual increase in inflation in nearly three years.

Higher interest rates increase borrowing costs for businesses and consumers, which could slow economic growth and reduce oil demand.

Meanwhile, Trump landed in Beijing on Wednesday after saying on Tuesday he did not think he would need China's help to end the war, even as prospects for a lasting peace deal weakened and Tehran tightened its grip over the Strait of Hormuz.

China is the biggest buyer of Iranian oil despite sanctions pressure from the Trump administration. Trump is scheduled to meet Xi on Thursday and Friday.

"There is likely to be some structural tightness (in the oil market) for at least the balance of this year," said Rystad analyst Janiv Shah.

OPEC on Wednesday lowered its forecast for world oil demand growth in 2026, while The International Energy Agency said global oil supply would not meet total demand this year as the war wreaks havoc on Middle East production.

U.S. crude stocks fell by 4.3 million barrels last week, compared with analysts' expectations in a Reuters poll for a 2.1-million-barrel draw, the U.S. Energy Information Administration said on Wednesday.

Gasoline stocks fell by 4.1 million barrels in the week, compared with analysts' expectations in a Reuters poll for a 2.9-million-barrel draw. ​Distillate stockpiles, which include diesel and heating oil, rose by 0.2 million barrels versus expectations for a 2.7-million-barrel drop.

Brent and U.S. crude futures extended gains briefly on the data. On Tuesday, oil prices rose more than 3% as hopes for a lasting U.S.-Iran ceasefire faded, dimming prospects for reopening the Strait of Hormuz, through which about a fifth of global oil and liquefied natural gas normally flows.

Peace in the Middle East remained fragile as Iran's Foreign Minister Abbas Araqchi said on Wednesday that Kuwait had "unlawfully" attacked an Iranian boat and detained four Iranian citizens in the Gulf. He added that Tehran demands their release and reserves the right to respond.