Oil prices steady as investors focus on Fed decision Reuters

By Yuka Obayashi

TOKYO (Reuters) – Oil prices steadied on Wednesday after rising in the past two sessions as investors awaited an anticipated interest rate cut by the U.S. Federal Reserve, with the potential for more violence in the Middle East underpinning the market .

November futures were down 3 cents at $73.67 a barrel at 0053 GMT. October futures fell 11 cents, or 0.2 percent, to $71.08 a barrel.

Both contracts gained about $1 a barrel on Tuesday due to persistent supply disruptions in the U.S., the world’s top oil producer, after Hurricane Francine and as traders bet demand could pick up following what the Fed’s first rate cut in four years.

Prices were also supported by the potential for more violence in the Middle East, which could cause possible production disruptions in the key producing region after Israel reportedly attacked the Hezbollah militant group with explosive-laden pagers in Lebanon.

“Markets calmed down as worries about hurricane damage and escalating tensions in the Middle East factored in,” said Mitsuru Muraishi, an analyst at Fujitomi Securities.

“Investors are now focused on the Fed’s interest rate cuts, which could revitalize US fuel demand and weaken the dollar,” he said, predicting that oil prices were likely to maintain an upbeat tone after Brent hit its highest low since 2021 last week.

Traders bet the Fed will begin an expected series of interest rate cuts on Wednesday with a move of half a percentage point lower, an expectation that could put pressure on central bankers to deliver just that.

Hezbollah vowed to retaliate against Israel after pagers detonated in Lebanon on Tuesday, killing at least eight people and wounding nearly 3,000 others, including fighters and Iran’s envoy to Beirut. Israel declined to comment on the detonations.

The market also found support from expectations of US oil purchases for the Strategic Petroleum Reserve (SPR).

The Biden administration will seek up to 6 million barrels of oil for the SPR, a source familiar with the matter said Tuesday, a purchase that, if completed, would equal the largest ever in replenishing the stockpile after a historic selloff. in 2022.

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

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