Oil Dips Ahead of Fed Rate Decision, Anticipated U.S. Crude Build

By Barani Krishnan

Investing.com -- Oil prices fell a day before a Federal Reserve rate decision that’s likely to deliver a third straight substantial rate hike for the United States. 

The dollar also rallied for a third time in four sessions, adding to the weight on oil prices as industry analysts forecast a third straight weekly build in domestic crude stockpiles.

The dollar jumped on bets that the Fed will raise rates by 75 basis points for a third time in a row when it meets Wednesday to rein in inflation. Those expectations weighed across risk assets on Tuesday, including stocks, with Wall Street key indexes from the Dow to S&P 500 and Nasdaq all down nearly 2% each.

“The dollar is key and the Fed is key; they're going to kill demand for anything inflationary," Robert Yawger, director of energy futures at Mizuho in New York, said in comments carried by Reuters.

The Fed isn’t the only one considering higher rates – central bank policymakers in the United Kingdom, Switzerland and Japan will also meet during the week as the global fight against inflation intensifies. China, however, left its benchmark lending rates unchanged on Tuesday as the world's second-biggest oil user tries to balance sluggish economic growth against its weakening yuan currency. 

“Energy traders await a wrath of central bank decisions that will trigger mid-cycle slowdowns that will cripple the short-term crude demand outlook,” Ed Moya, analyst at online trading platform OANDA, said. “Commodities are broadly weaker as this week is all about aggressive monetary policy tightening to combat inflation.”

New York-traded West Texas Intermediate, which serves as the U.S. crude benchmark, settled down $1.28, or 1.5%, at $84.45 per barrel, after a session low at $83.03. 

Brent, the London-traded global benchmark for oil, settled down $1.38, or 1.5%, at $90.62 per barrel, versus its intraday low of $89.83.

Also weighing on oil was U.S. Transportation Department data showing domestic vehicle travel in July fell 3.3% to 286.6 billion miles, the second consecutive monthly decline in American driving in the face of high fuel prices.

Market participants are, meanwhile, on the lookout for U.S. weekly oil inventory data, due after market settlement from API, or the American Petroleum Institute.

API will release at approximately 16:30 ET (20:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week ended September 16. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.

For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile build of 2.161 million barrels, versus the 2.442-million barrel rise reported during the week to September 9.

On the gasoline inventory front, the consensus is for a draw of 431,000 barrels over the 1.767-million barrel decline in the previous week.

With distillate stockpiles, the expectation is for a climb of 420,000 barrels versus the prior week’s gain of 4.219 million.

Begin trading today! Create an account by completing our form

Privacy Notice

At One Financial Markets we are committed to safeguarding your privacy.

Please see our Privacy Policy for details about what information is collected from you and why it is collected. We do not sell your information or use it other than as described in the Policy.

Please note that it is in our legitimate business interest to send you certain marketing emails from time to time. However, if you would prefer not to receive these you can opt-out by ticking the box below.

Alternatively, you can use the unsubscribe link at the bottom of the Demo account confirmation email or any subsequent emails we send.

By completing the form and downloading the platform you agree with the use of your personal information as detailed in the Policy.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.4% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Back to top

Office network
  • London Office
    One Financial Markets 

    1 Finsbury Market
    EC2A 2BN
    United Kingdom

    T:  + 44 ( 0 ) 203 857 2000
    E:  info@ofmarkets.com
  • Dubai Office
    One Financial Markets 
    OT19-39 Central Park Tower
    Dubai International Finance Centre
    United Arab Emirates
    T: + 00 971 44 22 888
    E:  info@ofmarkets.com

One Financial Markets is the trading name of Axi Financial Services (UK) Ltd, a company registered in England with company number 6050593. Axi Financial Services Ltd is authorised and regulated by the Financial Conduct Authority in the UK (under firm reference number 466201) and the Financial Sector Conduct Authority in South Africa (with FSP number 45784).

The information on this site is not directed at residents of the United States, Belgium, Poland or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

www.onefinancialmarkets.com is owned and operated by Axi Financial Services (UK) Ltd.

Award winning broker
We have been presented with a number of awards that recognise the quality of our service and dedication to our clients :

Best FSA Regulated Broker
Saudi Money Expo

Best Education Product
Saudi Money Expo

Best Broker - Online Trading
IAIR Awards

Best Institutional Broker
Saudi Money Expo

Best FX Services Broker
CN Forex

Top International
FX Broker 2015

Saudi Money Expo

Broker of the Year
Online Trading – Middle East

IAIR Awards

Best Forex
Customer Service 2018

JFEX Awards

We accept the following payment methods: