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Oil Prices Steady Amid U.S. Inventory Build and Federal Reserve Meeting

Oil prices remained steady in Asian trade on Wednesday, after sharp gains earlier this week, as market attention shifted toward a potential build in U.S. crude inventories and an upcoming interest rate decision by the Federal Reserve.

Crude prices surged earlier this week, supported by U.S. threats to sanction Russian oil buyers in a bid to pressure Moscow to end its conflict with Ukraine. Additionally, positive developments in U.S.-EU trade relations, following a trade deal between the two, further bolstered oil prices.

However, the momentum was tempered by industry data showing an unexpected build in U.S. inventories, raising concerns about demand in the world’s largest fuel consumer amid ongoing economic uncertainty. The market is also waiting for signals from the Federal Reserve’s interest rate decision on Wednesday, along with other crucial economic indicators expected later this week.

Oil Prices Movement:

  • Brent crude for September rose 0.2% to $72.68 per barrel.
  • West Texas Intermediate (WTI) crude for the same month rose 0.1% to $69.28 per barrel by 20:53 ET (00:53 GMT).

U.S. Inventories Show Unexpected Increase:

Data released by the American Petroleum Institute (API) on Tuesday showed a 1.5 million barrel increase in U.S. oil inventories for the week ending July 25, contrary to expectations of a 2.5 million barrel drawdown. This was a reversal from the prior week’s small inventory draw and has raised concerns about demand in the U.S., particularly given the uncertain economic environment.

The API data is often followed by official inventory data later on Wednesday, which may provide further insight into the state of U.S. crude supplies.

Focus on Federal Reserve Decision:

Investors are awaiting the outcome of the Federal Reserve’s two-day meeting, with markets widely expecting the central bank to keep interest rates unchanged. However, the strength of the dollar, in anticipation of the Fed’s decision, has put some downward pressure on oil prices.

Economic Indicators and Global Focus:

Several key U.S. economic data points are due this week, including the nonfarm payrolls data on Friday, which will be closely scrutinized for signs of labor market strength.

The U.S.-EU trade deal also continues to be in focus, with President Trump’s deadline for new tariffs landing on Friday, adding to uncertainty in global trade dynamics.

Asia’s Key Data:

  • China’s PMI (Purchasing Managers’ Index) data, due Thursday, will provide further insight into the state of the world’s second-largest economy. This comes after China’s resolution of its bitter trade war with the U.S. earlier this year, with traders hoping the PMI figures will offer reassurance about future demand.
  • Additionally, the Bank of Japan (BOJ) is set to announce its interest rate decision on Thursday, with most analysts expecting the central bank to keep rates unchanged amidst ongoing concerns about trade tensions and political leadership in Japan.

Market Sentiment:

While trade deal optimism between the U.S. and Europe has supported the oil market, inventory builds and economic uncertainty weigh on sentiment. Investors will be looking for signals on future demand, especially after recent geopolitical events and trade policy changes.

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