Oil’s Decline Precedes Fed Rate Policy Announcement

As per the Reuters report, investors are unsure of when peak rates will be reached and how much of an impact it will have on energy consumption, therefore oil prices declined further on September 20th from 10-month highs ahead of the U.S. Federal Reserve’s interest rate decision.

Despite a larger-than-anticipated drawdown in US oil inventories and sluggish US shale production, which pointed to a limited supply of fuel for the remainder of 2023, prices plummeted.

Benchmark Brent crude futures were last down 80 cents, or 0.8%, at $93.54 per barrel by 0310 GMT, having dropped just over $1 to $93.33 per barrel. Tuesday saw Brent reach $95.96, the highest level since November.

After reaching a 10-month high of $93.74 a barrel the day before, U.S. West Texas Intermediate oil futures fell 0.8%, or 75 cents, to $90.45 a barrel. The more active November contract was down 70 cents, or 0.8%, to $89.78 a barrel. The October WTI contract expires on Wednesday.

In order to evaluate the prospects for economic development and fuel demand, investors are anticipating a number of central bank interest rate decisions this week, including one by the U.S. Federal Reserve on Wednesday. Although it is predicted that the Fed will hold interest rates steady, attention will be on its uncertain policy direction.

According to market sources citing American Petroleum Institute data on Tuesday, the nation’s crude oil stockpiles decreased by roughly 5.25 million barrels over the past week. Per Reuters survey, analysts had predicted a drop of 2.2 million barrels.

To combat gasoline shortages, the Russian government is also thinking about levying $250 per metric ton export tariffs on all sorts of oil products, which would be a significant increase over the present rates, sources told Reuters on Tuesday.

This action comes as the nation’s main shale-producing regions are expected to produce 9.393 million barrels per day (bpd) of oil in October, the least amount since May 2023.

That action was taken after Saudi Arabia and Russia extended their combined supply cutbacks of 1.3 million bpd until the end of the year, and as U.S. oil output from the major shale-producing regions is on course to decline to 9.393 million bpd in October, the lowest since May 2023.

In accordance with official data released on Tuesday, India’s demand for crude oil decreased for a third consecutive month in August as refineries in the third-largest importer in the world underwent maintenance and curtailed exports from Russia.

In terms of supply, Exxon Mobil Corp (XOM.N) has committed to boosting oil production in Nigeria by roughly 40,000 barrels per day as part of a major investment drive in the nation, according to a presidential spokesperson on Tuesday, citing Exxon’s president of global upstream operations.