TOKYO, Sept 18 (Askume) – Oil prices stabilized on Wednesday after rising in the previous two sessions, supporting the market as investors await expectations of a Federal Reserve interest rate cut and the possibility of more violence in the Middle East.
November Brent crude futures fell 3 cents to $73.67 a barrel at 0053 GMT. October U.S. crude futures fell 11 cents, or 0.2%, to $71.08 a barrel.
Both contracts rose by about $1 a barrel as traders expected the Federal Reserve to raise interest rates for the first time in four years, with a rate cut likely to boost demand as the world’s biggest oil producer faces supply disruptions in the wake of Hurricane Francine.
Prices were also supported by the prospect of more violence in the Middle East after Israel reportedly attacked Lebanese militant group Hezbollah with a pager packed with explosives, which could disrupt output at key producing regions.
“The market has calmed down due to concerns about typhoon damage and rising tensions in the Middle East,” said Mitsuru Muraishi, an analyst at Fujitomi Securities.
He said, “Now, investors are hoping for a rate cut by the Federal Reserve, which may boost US fuel demand and weaken the dollar.” He predicted that oil prices may continue to rise after Brent hit its lowest level since 2021 last week.
Traders are anticipating that the Fed will begin a series of expected rate cuts on Wednesday, starting with a half-percentage cut, an expectation that could put pressure on central bankers to do the same.
Hezbollah has vowed to retaliate against Israel after a rocket exploded in Lebanon on Tuesday , killing at least eight people and wounding nearly 3,000, including militants and Iran’s envoy to Beirut. Israel declined to comment on the bombing.
Expectations of US purchases of Strategic Petroleum Reserve (SPR) also supported the market.
A person familiar with the matter said on Tuesday that the Biden administration will seek 6 million barrels of oil for the SPR , which if completed would be the biggest ever purchase of oil to replenish reserves after a historic sell-off in 2022.
US oil reserves data released by the American Petroleum Institute (API) on Tuesday showed an increase. Market sources quoted API data as saying that oil reserves rose by 1.96 million barrels in the week ended September 13, and gasoline and distillate reserves both rose by about 2.3 million barrels.
Analysts polled by Askume expected, on average, that crude inventories fell by about 500,000 barrels last week. The U.S. Energy Information Administration report is due out on Wednesday at 10:30 a.m. ET (1430 GMT).
