Oil prices dipped on Wednesday, interrupting a recent upswing as industry reports revealed an unexpected rise in U.S. inventories.
Nonetheless, prices had enjoyed substantial gains over the past week, driven by ongoing supply disruptions caused by Hurricane Francine and the expectation of lower interest rates, prompting traders to invest in crude at significantly reduced prices.
Heightened tensions in the Middle East also contributed to increased demand for crude oil.
Brent oil futures decreased by 0.4 percent, settling at $73.41 a barrel, while West Texas Intermediate crude futures also fell by 0.4 percent, priced at $69.69 a barrel by 21:17 ET (01:17 GMT). Both contracts had experienced a notable recovery from nearly three-year lows in the previous week.
U.S. inventories show unexpected increase – API
Inventories grew by 1.96 million barrels, contrasting with expectations for a decrease of 0.1 million barrels and a 2.79 million barrel drop from the week prior.
This report follows last week’s official data that also showed an increase in U.S. inventories, suggesting a cooling demand in the world’s largest fuel consumer with the conclusion of the busy summer travel season.
The API data often anticipates similar trends in the forthcoming official inventory report, expected later on Wednesday. The unexpected rise also suggests minimal actual disruptions to production from Hurricane Francine, which impacted the Gulf of Mexico last week.
Demand concerns and rate cuts in focus
Chinese markets reopened on Wednesday after an extended holiday, with local traders responding to a series of disappointing economic indicators from the country.
These indicators heightened worries about slowing growth in the world’s largest oil importer, potentially affecting its crude demand.
Additionally, markets were on alert ahead of the conclusion of a two-day Federal Reserve meeting later in the day, where a reduction in interest rates is widely anticipated for the first time in over four years.
Expectations are divided between a 25 or 50 basis point cut.
The anticipation of Wednesday’s decision led to a decline in the dollar, which helped boost some gains in crude oil prices.
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