Oil Prices Steady as Investors Await Fed Decision

Oil prices remained stable on Wednesday after recent gains, as investors eagerly anticipate the U.S. Federal Reserve's expected interest rate cut. The market is also being influenced by potential violence in the Middle East and supply disruptions in the U.S. following Hurricane Francine. Additionally, there is speculation about U.S. oil purchases for the Strategic Petroleum Reserve (SPR).

**Market Overview**

Brent crude futures for November dropped by 3 cents to $73.67 a barrel at 0053 GMT, while U.S. crude futures for October slid by 11 cents, or 0.2%, to $71.08 a barrel. Both contracts had gained approximately $1 a barrel on Tuesday due to lingering supply disruptions in the U.S., the world's largest oil producer, and expectations of increased demand following the Fed's anticipated interest rate cuts, the first in four years.

**Middle East Tensions**

The potential for increased violence in the Middle East is also supporting oil prices. Israel allegedly attacked the militant group Hezbollah with explosive-laden pagers in Lebanon, raising concerns about possible output disruptions in this key producing region. Hezbollah has promised retaliation, which could further destabilize the area.

**Analyst Insights**

"Markets have calmed down as concerns over hurricane damage and escalating tensions in the Middle East have been factored in," said Mitsuru Muraishi, an analyst at Fujitomi Securities. "Now, investors are focusing on the Fed's rate cuts, which could revitalize U.S. fuel demand and weaken the dollar," he added. Muraishi predicts that oil prices are likely to maintain a bullish tone after Brent hit its lowest level since 2021 last week.

**Federal Reserve's Impact**

Traders are betting that the Fed will start a series of interest rate cuts with a half-percentage-point move downward on Wednesday. This expectation may itself pressure central bankers to deliver on these predictions. A rate cut could boost U.S. fuel demand and weaken the dollar, making oil cheaper for holders of other currencies.

**Strategic Petroleum Reserve**

The market also found support from the expectation of U.S. oil purchases for the SPR. The Biden administration is seeking up to 6 million barrels of oil for the SPR, a purchase that, if completed, will match its largest yet in the replenishment of the reserve after a historic sale in 2022.

**U.S. Oil Inventory Data**

U.S. oil inventory data released on Tuesday from the American Petroleum Institute (API) was mixed. Oil stockpiles rose by 1.96 million barrels in the week ended September 13, according to market sources citing the API figures. However, gasoline and distillate stocks both rose by about 2.3 million barrels. Analysts polled by Reuters estimated on average that crude inventories fell by about 500,000 barrels last week. The U.S. Energy Information Administration's report is due on Wednesday at 10:30 a.m. EDT (1430 GMT).