Oil prices steadied on Wednesday following two sessions of gains, as investors awaited the US Federal Reserve’s expected interest rate cuts. The potential for increased violence in the Middle East also supported the market.
Brent crude futures for November saw a slight dip, dropping 3 cents to $73.67 a barrel at 0053 GMT. Meanwhile, US crude futures for October slipped by 11 cents, or 0.2%, to $71.08 a barrel. Both contracts had gained about $1 a barrel on Tuesday, driven by lingering supply disruptions in the US, the world’s largest oil producer, following Hurricane Francine. Traders also bet on increased demand following what would be the Fed’s first interest rate cuts in four years.
Rising tensions in the Middle East added to the price support. Israel allegedly attacked Hezbollah with explosive-laden pagers in Lebanon, raising concerns about potential output disruptions in the region. The attack killed at least eight people and wounded nearly 3,000, including Iran’s envoy to Beirut.
“Markets have calmed down as concerns over hurricane damage and escalating tensions in the Middle East have been factored in,” said Mitsuru Muraishi, an analyst at Fujitomi Securities. “Now, investors are focusing on the Fed’s rate cuts, which could revitalise US fuel demand and weaken the dollar.”
In addition, the Biden administration’s plan to purchase up to 6 million barrels of oil for the Strategic Petroleum Reserve (SPR) further supported the market. This purchase would match the largest replenishment since the historic sale from the SPR in 2022.
US oil inventory data also played a role in market dynamics. According to the American Petroleum Institute (API), oil stockpiles rose by 1.96 million barrels in the week ending September 13, with gasoline and distillate stocks both climbing by about 2.3 million barrels. However, analysts polled by Reuters had expected a decrease of around 500,000 barrels.
The US Energy Information Administration’s report, due later on Wednesday, is expected to provide further insights into the state of the market.
