SINGAPORE: Oil prices held their ground in early trade on Wednesday, pausing after a sharp rise the previous day as traders assessed the impact of escalating tensions in Russia and looked ahead to a key interest rate decision by the US Federal Reserve.
Markets watch Russia supply risks
Brent crude futures inched down by just one cent to $68.46 a barrel at 0114 GMT, while US West Texas Intermediate (WTI) crude also slipped one cent to $64.51. The minimal moves followed a jump of more than 1 percent in the last session, driven by worries over potential supply disruptions after drone strikes targeted Russian export ports and refineries.
According to Reuters, three industry sources said Russia’s state-owned oil pipeline monopoly, Transneft, has warned producers they may need to reduce output following the attacks. Any disruption from one of the world’s largest oil suppliers could tighten global markets, which explains why prices climbed the previous day.
Meanwhile, European Commission President Ursula von der Leyen said on Tuesday the bloc would propose accelerating efforts to phase out Russian fossil fuel imports. She urged European governments to intensify pressure on Moscow, adding to the sense that Russian oil supplies could face further obstacles ahead.
All eyes on Fed meeting
Traders are also bracing for the outcome of the Federal Reserve’s policy meeting, which concludes later on Wednesday. The central bank is widely expected to lower interest rates by 25 basis points to support the slowing US economy, which could boost fuel demand.
However, attention is on how divided the Fed might be. Stephen Miran, a new governor who previously worked in the Trump administration, has reportedly pushed for a larger 50-basis-point cut, while another policymaker, Lisa Cook, is facing pressure from President Donald Trump, who has sought to remove her.
IG market analyst Tony Sycamore said markets would be watching whether others side with Miran and how many rate cuts are hinted for later this year. He added that any short-term surge in risk assets, including oil, could fade quickly if follow-up cuts are expected in October and December.
US stockpile data adds support
Adding a potentially bullish layer, data from the American Petroleum Institute showed US crude inventories fell by 3.42 million barrels last week, while gasoline stocks dropped by 691,000 barrels. Distillate inventories rose by 1.91 million barrels.
Traders are now waiting to see if official figures from the US Energy Information Administration due later on Wednesday confirm the trend. Analysts polled by Reuters expect a smaller drop of about 900,000 barrels in crude stocks, alongside a rise of 1 million barrels in distillates and a slight increase in gasoline.
With geopolitical risks bubbling in Russia and hopes of looser US monetary policy, oil markets appear set for more turbulence in the coming days.