September 20, 2023 (MLN): Oil prices fell ahead of the U.S. Federal Reserve's meeting on Wednesday as investors remained uncertain about when interest rates might peak, given the uncertain demand outlook.
Brent crude is currently trading at $92.54 per barrel, down by 1.06% on the day.
While West Texas Intermediate crude (WTI) is trading at $89.59 per barrel, down by 1.02% on the day.
"The oil rally is taking a little break as every trader awaits a pivotal Fed decision that might tilt the scales of whether the U.S. economy has a soft or hard landing," said Edward Moya, senior market analyst at data and analytics firm OANDA, as Reuters reported.
Moya added that the oil market is still "very tight" and will remain so over the short term.
"Unless Wall Street grows nervous the Fed will kill the economy, the crude demand outlook should (only) gradually soften, but the oil market will easily have a supply deficit throughout winter," he added.
Investors are awaiting a raft of central bank interest rate decisions this week, including one by the U.S. Federal Reserve on Wednesday, to assess the outlook for economic growth and fuel demand.
The Fed is widely expected to keep interest rates on hold, but the focus will be on its policy path, which is unclear.
U.S. crude oil stockpiles fell last week by about 5.25 million barrels, according to market sources citing American Petroleum Institute figures on Tuesday.
"A large drop in U.S. oil inventories and slow U.S. shale output have added to supply concerns coming from extended production curbs by Saudi Arabia and Russia," said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
"There will be some short-term adjustments in oil prices because of the recent spike, but expectations of reaching $100 a barrel on both Brent and WTI later this year will remain unchanged," he said.
Additionally, Russia's government is considering imposing export duties on all types of oil products of $250 per metric ton – much higher than current fees from October 01 until June 2024 to tackle fuel shortages.
That move comes as U.S. oil output from top shale-producing regions is on track to fall to 9.39m bpd in October, the lowest since May 2023, and after Saudi Arabia and Russia extended combined supply cuts of 1.3m bpd to the end of the year.
On the demand side, India's crude oil imports fell for a third month in a row in August, government data showed on Tuesday, as refiners in the world's third-biggest importer carried out maintenance and reduced shipments from Russia.
On supply, Exxon Mobil Corp has pledged additional oil production of nearly 40,000 barrels per day in Nigeria in a new investment push in the country, a presidential spokesperson said on Tuesday, citing Exxon's president of global upstream operations.
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Posted on: 2023-09-20T10:48:26+05:00
