Oil prices steady, investors focus on Fed decision

Oil prices held steady on Wednesday after rising in the previous two sessions, as investors awaited an expected interest rate cut by the US Federal Reserve, with further violence likely to support markets in the Middle East.

Brent crude futures for November were down 3 cents at $73.67 a barrel at 0053 GMT. US crude futures for October settled down 11 cents, or 0.2%, at $71.08 a barrel.

Both contracts rose about $1 a barrel on Tuesday due to lingering supply disruptions in the U.S., the world’s biggest oil producer, after Hurricane Francine, and traders claimed demand could pick up in the wake of what would be the Fed’s first interest rate cut in four years.

Prices were also supported by the prospect of more violence in the Middle East, after Israel allegedly attacked militant group Hezbollah in Lebanon with explosive-laden pagers that could cause possible output disruptions in the key producing region.

“The markets have calmed due to worries about damage from the typhoon and rising tensions in the Middle East,” said Mitsuru Muraishi, an analyst at Fujitomi Securities.

“Now, investors are focusing on the Fed’s rate cuts that could revive US fuel demand and weaken the dollar,” he said, predicting oil prices to maintain a bullish tone after Brent hit its lowest level since 2021 last week. is likely.

Traders were betting that the Fed would begin an expected series of interest rate cuts with a half-percentage-point downward move on Wednesday, an expectation that itself could put pressure on central bankers.

Hezbollah vowed to retaliate against Israel after pagers exploded across Lebanon on Tuesday, killing at least eight people and injuring nearly 3,000 others, including fighters and Iran’s ambassador to Beirut. Israel declined to comment on the blasts.

Expectations of US oil purchases for the Strategic Petroleum Reserve (SPR) also supported the market.

The Biden administration will seek 6 million barrels of oil for the SPR, a source familiar with the matter said Tuesday, a purchase that, if completed, would match its largest amount in stockpile replenishment since the historic sell-off in 2022.

US oil inventory data released on Tuesday from the American Petroleum Institute (API) was mixed. Oil stocks rose by 1.96 million barrels in the week ended Sept. 13, market sources said, citing API data, but both gasoline and distillate stocks rose by about 2.3 million barrels.

Analysts polled by Reuters had on average estimated that crude inventories fell by about 500,000 barrels last week. The US Energy Information Administration report is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.