Oil Prices Steady as Markets Weigh U.S. Output and Fed Decision

Oil prices held steady on Tuesday after gaining more than $1 in the previous session, as traders assessed U.S. production concerns following Hurricane Francine, alongside expectations of lower U.S. crude stockpiles and the upcoming U.S. Federal Reserve policy decision.

Brent crude futures for November remained unchanged at $72.77 per barrel as of 08:15 GMT, while U.S. crude futures for October rose slightly by 0.17%, up 12 cents to $70.21 per barrel. Both benchmarks had settled higher on Monday amid ongoing production disruptions in the U.S. Gulf of Mexico, where over 12% of crude production and 16% of natural gas output remain offline, according to the U.S. Bureau of Safety and Environmental Enforcement (BSEE).

Focus on Fed Rate Cut and U.S. Inventories

Markets are closely watching the U.S. Federal Reserve’s two-day meeting, which concludes on Wednesday. Traders expect the Fed to begin an easing cycle, with Fed funds futures indicating a 69% chance of a 50 basis point rate cut. A reduction in interest rates could lower borrowing costs, potentially boosting economic activity and oil demand.

Additionally, investors are eyeing U.S. crude inventories, which are expected to have declined by around 200,000 barrels in the week ending September 13, according to a Reuters poll. A drop in stockpiles could provide further support to oil prices.

China Demand Concerns Linger

Despite these positive drivers, concerns over demand in China, the world’s largest oil importer, continue to weigh on the market. Government data showed that China’s oil refinery output fell for the fifth consecutive month in August, reflecting weak domestic fuel demand and poor export margins. The continued slowdown in China’s economy has raised fears of softer global oil demand growth.

As traders await the Fed’s decision and U.S. inventory data, oil prices remain in a cautious holding pattern, balancing U.S. supply disruptions against demand concerns in China.