Oil Prices Decline as US Inventories Rise

Oil prices fell on Wednesday, cutting short a recent rebound as industry data indicated an unexpected rise in US inventories.

Prices have seen substantial increases over the past week due to ongoing supply disruptions from Hurricane Francine and the possibility of lower rates, enticing traders to invest in discounted crude.

Additionally, rising tensions in the Middle East boosted demand for crude, particularly after Hezbollah threatened retaliation against Israel over allegations of detonating pagers in Lebanon this week.

Brent oil futures decreased by 0.2% to $73.53 a barrel, while West Texas Intermediate crude futures fell to $69.84 per barrel, also down by 0.2% by 10:18 ET (14:18 GMT). Both contracts experienced significant gains from near three-year lows in the past week.

Unexpected Rise in US Inventories – API

According to data from the American Petroleum Institute (API), US oil inventories unexpectedly increased by 1.96 million barrels per day for the week ending September 13. This was contrary to the anticipated draw of 0.1 million bpd and follows a prior decline of 2.79 million bpd.

Recent official data indicated a build in US inventories, suggesting that demand in the world's largest fuel consumer is subsiding as the travel-heavy summer season concludes. The API data typically foreshadows a similar trend in official inventory reports, which are expected later on Wednesday. This surprise rise also points to limited production disruptions from Hurricane Francine.

Focus on Demand Concerns and Rate Cuts

Chinese markets reopened on Wednesday after a lengthy holiday, with traders responding to several weak economic indicators from the country. These reports heightened concerns about slowing growth in the world’s largest oil importer, potentially impacting its crude demand.

Markets are also cautious ahead of the conclusion of a two-day Federal Reserve meeting, where a rate cut is widely anticipated for the first time in over four years. The market is divided on whether the reduction will be 25 or 50 basis points.

Expectations surrounding Wednesday's decision have subsequently weakened the dollar, contributing to some gains in crude prices.

(Ambar Warrick contributed reporting)