Oil futures fell early Wednesday as investors awaited a Federal Reserve policy decision and official data on U.S. inventories of crude and petroleum products.
Price action
- West Texas Intermediate crude for September delivery CL.1, -1.07% fell 88 cents, or 1.1%, to $ 78.75 a barrel on the New York Mercantile Exchange.
- September Brent crude BRNU23, -0.97%, the global benchmark, was down 91 cents, or 1.1%, at $ 82.73 a barrel on ICE Futures Europe. October Brent BRN00, -0.96% BRNV23, -0.96%, the most actively traded contract, declined 90 cents, or 1.1%, to $ 82.35 a barrel.
- Back on Nymex, August gasoline RBQ23, +1.15% rose 0.9% to $ 2.878 a gallon, while August heating oil HOQ23, +0.79% was up 0.7% at $ 2.798 a gallon.
- August natural gas NGQ23, -1.98% fell 1.4% to $ 2.691 per million British thermal units.
Market drivers
Both WTI and Brent ended Tuesday at their highest since April 18 and have scored four straight weekly gains, buoyed by expectations the physical market will be moving into deficit in the second half of the year. Supply cuts by Saudi Arabia and Russia have contributed to the positive tone.
Crude remains lower in the year to date. Upside has been limited by fears aggressive monetary tightening by global central banks could spark a significant economic slowdown, though that has been tempered by expectations interest rate hikes may be near an end. The Federal Reserve on Wednesday is widely expected to deliver a quarter percentage point rate hike that many investors expect to be the last of a cycle that began in March 2022.
Investors will also be keying in on official data on U.S. crude and product inventories.
The American Petroleum Institute late Tuesday said U.S. crude inventories rose 1.3 million barrels last week, according to a source citing the data, while gasoline supplies fell 1 million barrels and distillate stocks rose 1.6 million barrels.
The Energy Information Administration will release official data on Wednesday morning. Analysts surveyed by S&P Global Commodity Insights, on average, expect the report to show supply declines of 4.4 million barrels for crude, 2 million barrels for gasoline, and 2.3 million barrels for distillates.
Traders, meanwhile, will likely focus on implied gasoline demand data within the EIA report, which has shown declines over the past two weeks.
Further weakness could suggest consumers are tightening up their spending habits and spending less on travel and leisure, analysts at Sevens Report Research wrote in a Wednesday note.
“Such a dynamic would be viewed as an early warning sign for a slowdown in growth as the consumer is the lifeblood of the U.S. economy,” they wrote. “So again, today’s
‘gasoline supplied’ figure within the weekly EIA report will be a critical figure to watch for both the energy markets and the health of the economy more broadly.”