Market Analysis
Oil prices fell on Wednesday after two consecutive sessions of gains, following an industry report that revealed a rise in U.S. crude and fuel inventories, which counterbalanced the impact of heightened Middle East tensions and the potential boost from a U.S. interest rate cut.
According to sources referencing American Petroleum Institute (API) data, U.S. crude inventories increased by 1.96 million barrels in the week ending September 13, alongside rises in gasoline and distillate stocks.
At 0810 GMT, Brent crude futures for November delivery dropped by 54 cents, or 0.7%, to $73.16 per barrel, while U.S. crude futures for October fell 46 cents, or 0.7%, to $70.73.
"Crude prices eased after the API's report of a weekly increase in U.S. crude and fuel inventories, which offset the persistent tensions in the Middle East," said Ole Hansen of Saxo Bank to Reuters.
Brent has recovered since dipping below $70, its lowest level since December 2021 on September 10. However, it faces resistance near $75 due to weak global refinery margins, indicating sluggish demand, Hansen noted.
The Federal Reserve is expected to implement its first interest rate cut in more than four years at 1800 GMT, with markets factoring in a 66% chance of a 50 basis point reduction.
"Uncertainty over the size of the Fed’s rate cut later today may also be prompting investors to exercise caution," remarked UBS analyst Giovanni Staunovo.
Oil prices received some support from concerns that escalating violence in the Middle East could threaten supply, following reports that Israel attacked Hezbollah in Lebanon. The militant group has vowed to retaliate against Israel.
The API's report will be followed by the U.S. Energy Information Administration's official data, due at 1430 GMT. Reuters' poll of analysts suggests an average expectation of a 500,000-barrel decline in crude stocks, while gasoline and distillate inventories are predicted to have risen slightly.
Paraphrasing text from "Reuters" all rights reserved by the original author.