Oil prices plummeted by more than $1 on Wednesday ahead of the U.S. Federal Reserve’s interest rate decision, leaving investors unsure when peak rates will hit and how they will affect energy demand.
Investors anticipate the Fed’s interest rate announcement at 1800 GMT on Wednesday to analyze economic growth and fuel consumption. The Fed will likely hold interest rates, but its policy future remains unclear.
“The oil surge is taking a small respite as every trader awaits a critical Fed decision that might shift the scales of whether the U.S. economy suffers a soft or hard landing,” said OANDA senior market analyst Edward Moya.
Brent futures declined $1.46, or 1.55%, to $92.88 a barrel by 0854 GMT.
WTI futures fell 1.43%, or $1.30, to $89.90 a barrel. The more active November WTI contract fell $1.38, or 1.53%, to $89.10 a barrel at 0854 GMT. The October contract expires on Wednesday.
Market sources quoting American Petroleum Institute numbers on Tuesday said prices fell despite U.S. crude oil stockpiles decreasing 5.25 million barrels last week. A Reuters survey predicted a 2.2 million-barrel drop.
“Barring any unpleasant surprises, attention will likely return to the perceived supply deficit once interest rate decisions are out of the way and $100/bbl remains a not-so-distant possibility,” said PVM analyst Tamas Varga.
“We now foresee slightly sharper inventory draws, thus we raised our 12-month Brent prediction from $93 to $100. In a Wednesday letter, Goldman Sachs analysts explained that lower OPEC production and stronger demand outweighed higher US supply.
In the U.K., August inflation dropped unexpectedly, raising hopes that the Bank of England could halt its historic interest rate hikes on Thursday. The CPI decreased 0.1 percentage points to 6.7%, its lowest since February 2022.
