Oil prices fell from their highest levels in ten months in Asian trading on Wednesday ahead of the Federal Reserve's (US central bank) decision on interest rates, with investors uncertain about when interest rates will reach their peak and the extent of this impact on energy demand.
Investors are awaiting a set of interest rate decisions from major central banks this week, including the US Federal Reserve's decision on Wednesday, to assess the outlook for economic growth and fuel demand.
The Fed is widely expected to keep interest rates unchanged, but the focus will be on its policy path, which is unclear.
Prices fell despite increasing fears of a scarcity of crude supplies in the remainder of 2023 due to a larger-than-expected withdrawal from US oil reserves and weak shale oil production in the United States.
Sector data showed on Tuesday that US crude oil inventories decreased last week by about 5.25 million barrels, according to data from the American Petroleum Institute.
Analysts in a poll conducted by Reuters had expected a decrease of 2.2 million barrels.
Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, said the significant decline in US oil inventories and the slowdown in shale oil production in the United States exacerbated supply concerns resulting from the extension of production restrictions by Saudi Arabia and Russia.
He added that there will be some short-term adjustments in oil prices due to the recent rise, but expectations of reaching $100 a barrel for both Brent and West Texas Intermediate later this year will remain unchanged.
Price action
By 0335 GMT, global benchmark Brent crude futures fell 79 cents, equivalent to 0.8 percent, to $93.55 per barrel, and yesterday it had recorded the highest level since November at $95.96.
US West Texas Intermediate crude futures fell 75 cents, or 0.8 percent, to $90.45 per barrel, and crude had risen to its highest level in 10 the previous day to levels of $93.74 per barrel.
Edward Moya, chief market analyst at data and analytics company OANDA, said: The pace of oil's rise is calming slightly as traders await a pivotal decision from the Federal Reserve that may change the balance on whether the US economy will witness a soft or sharp decline.
Moya added that the oil market is still very tight and will remain so in the short term.
In addition, the Russian government is considering imposing export duties on all types of petroleum products of $250 per metric ton - much higher than current duties - from October 1 until June 2024 to address fuel shortages, sources told Reuters on Tuesday.
This step comes at a time when US oil production from the largest shale producing regions is heading to decline to 9.393 million barrels per day in October, the lowest level since May 2023, and after Saudi Arabia and Russia extended voluntary supply cuts of 1.3 million barrels per day until the end of the year. .
On the demand side, government data showed, on Tuesday, that India’s crude oil imports declined for the third month in a row in August, as refineries in the world’s third-largest importer conducted maintenance work and reduced shipments from Russia.
Regarding supplies, ExxonMobil has pledged to produce about 40,000 barrels per day of additional oil in Nigeria in a new investment push in the country, a Nigerian presidential spokesman said on Tuesday, citing the head of Exxon’s upstream operations.
