Oil Prices Fall Despite Recent Rebound

Oil prices saw a decline on Wednesday, interrupting a recent recovery, as industry data revealed an unforeseen increase in US inventories.

However, prices had experienced substantial gains over the previous week due to ongoing supply disruptions from Hurricane Francine and the anticipation of lower interest rates, leading traders to invest in crude at significantly reduced prices.

Additionally, heightened tensions in the Middle East contributed to a surge in demand for crude, particularly after Hezbollah declared intentions to retaliate against Israel, alleging Israeli detonations across Lebanon this week.

Brent oil futures decreased by 0.2%, settling at $73.53 a barrel, while West Texas Intermediate crude futures also fell by 0.2%, to $69.84 per barrel by 10:18 ET (14:18 GMT). Both futures had sharply rebounded from near three-year lows over the past week.

US Inventories Unexpectedly Increase – API

The American Petroleum Institute reported an unexpected increase in US oil inventories for the week ending September 13, with inventories advancing by 1.96 million barrels per day. This contrasted sharply with expectations for a decrease of 0.1 million bpd and a prior week decrease of 2.79 million bpd.

This increase aligns with last week’s official data indicating a rise in US inventories, signaling a potential cooling in demand from the world’s largest fuel consumer as the busy summer travel season winds down. The API’s findings typically anticipate a similar trend in the official inventory report due later on Wednesday. The unexpected increase also reflects minimal disruptions to production resulting from Hurricane Francine, which impacted the Gulf of Mexico last week.

Demand Concerns and Rate Cuts in Focus

Chinese markets reopened on Wednesday after an extended holiday, where local traders reacted to a series of disappointing economic indicators from the country.

These readings raised concerns regarding slowing growth in the world’s largest oil importer, which could diminish its demand for crude oil.

Moreover, markets remained tentative before the conclusion of a two-day Federal Reserve meeting, where a reduction in interest rates is anticipated for the first time in over four years. Market predictions are divided between a 25 or 50 basis point cut.

Expectations surrounding Wednesday’s decision diminished the dollar’s value, which provided some support for crude oil prices.

(Ambar Warrick contributed reporting)