Oil prices down by a dollar before US rates decision

London — Oil prices fell by more than $1 on Wednesday ahead of the US Federal Reserve's interest-rate decision, with investors uncertain when peak rates will be hit and how much of an impact it will have on energy demand.

Investors are awaiting the Fed's interest rate decision at 6pm GMT 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 projected policy path, which is unclear.

“The oil rally is taking a little break as every trader awaits a pivotal Fed decision that might tilt the scales of whether the US economy has a soft or hard landing,” Oanda senior market analyst Edward Moya said.

Global benchmark Brent crude futures fell $1.46, or 1.55%, to $92.88 a barrel by 8.54am GMT.

US West Texas Intermediate crude futures shed 1.43%, or $1.30, to $89.90 a barrel. The October WTI contract expires on Wednesday and the more active November contract was down $1.38, or 1.53%, to $89.10 a barrel at 8.54am GMT.

Prices fell despite US crude oil stockpiles falling last week by about 5.25-million barrels, according to market sources citing American Petroleum Institute figures on Tuesday. Analysts in a Reuters poll had expected a 2.2 million-barrel decline.

“Barring any unpleasant surprise, attention will most likely return to the perceived supply deficit once interest-rate decisions are out of the way and reaching the $100/bbl milestone remains a not-so-distant possibility,” said Tamas Varga, analyst at oil broker PVM.

“We have nudged up our 12-month ahead Brent forecast from $93 a barrel to $100 a barrel as we now expect modestly sharper inventory draws. The key reason is that significantly lower Opec supply and higher demand more than offset significantly higher US supply,” said Goldman Sachs analysts in a Wednesday note.

Elsewhere, data from the UK showed a surprise drop in inflation in August, sparking expectations that the Bank of England could pause its historic run of interest rate hikes as soon as Thursday. The consumer price index fell by 0.1 percentage points to 6.7%, its lowest since February 2022.

Reuters