Oil rises on surprise crude output

Crude oil prices rose today after the US Energy Information Administration reported an estimated drawdown of 1.6 million barrels for the week to September 13.

That compared with a modest build of 800,000 barrels for the previous week, which hurt prices already depressed by demand concerns.

This week, however, the biggest news in the oil market is the Federal Reserve’s upcoming rate announcement, scheduled for 2:00 PM ET. Market participants and analysts alike expect the central bank to announce its first interest rate cut in four years as the economy shows resilience and inflation eases.

Lower interest rates are likely to boost oil prices, unless concerns about rising demand in China outweigh the upside. The big question for those awaiting the Fed’s decision is whether the cut would be a modest 0.25% cut or what some analysts are calling a jumbo 0.5% cut.

Meanwhile, the EIA forecast a minor rise in gasoline inventories of 100,000 barrels for the week to Sept. 13, with production averaging 9.7 million bpd over the period.

These figures compare with a stockpile of 2.3 million barrels for the previous week, when production averaged 9.4 million barrels per day.

Meanwhile, in middle distillates, the EIA noted that inventories added a modest 100,000 barrels last week, with production averaging 5.1 million barrels per day.

That compared to a stockpile increase of 2.3 million barrels, the same size as the gasoline build, and average daily production of 5.2 million barrels.

Demand for all fuels should increase in a lower rate environment, as this would lower costs for everything from energy to real estate, giving the economy a much-needed boost.

“It’s been a long marathon — the Fed thinks it’s time to cut interest rates again,” Sara Rathner, co-host of the Smart Money podcast and personal finance expert for NerdWallet, told CBS ahead of the Fed’s announcement. “Consumers are definitely feeling the pinch. It was this one-two punch of higher interest rates and inflation.”

By Irina Slav for Oilprice.com

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