Oil prices edged lower during Wednesday's Asian session, pausing after gains of more than 1% in the previous session, as traders balanced geopolitical risks with anticipation of an interest rate cut by the United States Federal Reserve.
By 3:10 pm AEST (5:10 am GMT), Brent crude futures slipped 10 cents, or 0.2%, to US$68.37 per barrel, while U.S. West Texas Intermediate (WTI) futures eased 7 cents, or 0.1%, to US$64.45 per barrel.
Both benchmarks had settled more than 1% higher on Tuesday amid fears of disruption to Russian supplies. Reuters reported that pipeline monopoly Transneft warned producers they may need to reduce output after Ukrainian drone attacks targeted export ports and refineries.
ANZ analysts said: "The full effect of the attacks on Russia’s oil flow is unclear. However, oil production fell to its lowest post-pandemic level of 8.8mb/d last week."
Adding to supply concerns, "Rising tensions in the Middle East are also providing some support. Israel launched an attack on the Yemeni port city of Hodeida, which threatens to escalate the conflict in the region and endanger crude oil supplies."
Markets are also awaiting the outcome of the Federal Reserve’s 16–17 September meeting, where policymakers are expected to cut interest rates by 25 basis points.
The decision comes with political overtones, as Stephen Miran, recently confirmed as a Fed governor, joins deliberations while President Donald Trump continues efforts to remove Governor Lisa Cook.
A rate cut would likely stimulate economic activity and fuel demand.
On the supply side, U.S. inventories tightened last week. The American Petroleum Institute reported crude stocks fell by 3.42 million barrels, well above expectations for a 1.6 million-barrel draw.
