By Peter Nurse
Investing.com -- Oil prices weakened Tuesday, weighed by signs of a weakening U.S. housing market, but movements are limited ahead of the start of the latest U.S. Federal Reserve meeting.
By 09:30 ET (13:30 GMT), U.S. crude futures traded 1.2% lower at $84.34 a barrel, while the Brent contract fell 0.9% to $91.19.
U.S. Gasoline RBOB Futures were up 0.2% at $2.4696 a gallon.
The number of permits given to build new U.S. houses slumped in August, falling to their lowest level in two years, as higher building and borrowing costs tempered demand, prompting fears that higher interest rates were slowing economic activity in the world’s largest economy.
Housing starts offered a contrary view, surprisingly bouncing by over 12%, but this rebound is a conspicuous outlier to other recent data from the housing market, which have almost without exception shown the sector cooling off.
This news overturned earlier gains that followed a report from Reuters which indicated that the Organization of Petroleum Exporting Countries and allies led by Russia fell short of its output target by 3.583 million barrels per day in August, around 3.5% of global oil demand.
That said, volumes are thin with traders wary that the latest policy-setting meeting by the Fed, concluding Wednesday, will result in more aggressive monetary tightening, potentially slowing economic growth further and curbing demand at the world’s largest economy.
The Fed is broadly expected to raise interest rates by 75 basis points on Wednesday, and signal more hikes as it moves to curb inflation reaching a 40-year high.
Data released this week showed that U.S. road travel fell 3.3% in July, as high fuel prices weighed. These prices have recently dipped, but rising interest rates could further reduce discretionary spending.
The Fed isn’t the only central bank expected to hike this week.
The Riksbank in Sweden raised its key interest rate by a full percentage point to 1.75% earlier Tuesday, more than expected, setting an ominous precedent for a handful of other central bank meetings later in the week.
The Bank of England, the Swiss National Bank and the Norges Bank are all expected to raise interest rates on Thursday, potentially curbing economic growth in the region further.
Also limited gains Tuesday were reports that the U.S. intends to sell 10 million barrels from its Strategic Petroleum Reserve in November.
"This sale would be part of the Biden administration's announcement back in March to release stocks from the SPR to combat higher prices," said analysts at ING, in a note. "Under that initial announcement the DOE authorized the release of 180MMbbls of crude oil from the SPR. According to the DOE, roughly 155MMbbls has been released up until now - this further sale would take the total volume to around 165MMbbls."
The American Petroleum Institute will publish at 16:30 ET its estimate of U.S. crude stocks, with last week’s figure showing a hefty 6 million barrel addition.