Oil prices experienced a slight increase today following a report by the U.S. Energy Information Administration (EIA). The report indicated a surprising drop of 1.6 million barrels in crude oil inventories for the week ending September 13. This is a stark contrast to the previous week’s inventory increase of 800,000 barrels, which had contributed to a decline in oil prices due to concerns about demand.
The most significant event impacting the oil market this week is the Federal Reserve’s anticipated interest rate announcement, set for 2 pm Eastern Time. Market watchers and analysts are widely expecting the Fed to cut interest rates for the first time in four years. This move comes in response to a resilient economy and a decrease in inflation.
Should the interest rates decrease, it is anticipated that oil prices will rise, unless concerns about demand growth in China overshadow this positive development. The central question for those awaiting the Fed’s decision is the extent of the rate cut—whether it will be a modest 0.25% or a more substantial 0.5%, as some analysts have suggested.
In addition to the crude oil inventory, the EIA also reported a small increase of 100,000 barrels in gasoline inventories for the week ending September 13. During this period, production averaged 9.7 million barrels per day (bpd). This is a notable change from the previous week’s inventory build of 2.3 million barrels, when daily production averaged 9.4 million bpd.
As for middle distillates, the EIA recorded a modest inventory increase of 100,000 barrels last week, with an average daily production of 5.1 million barrels. This is in comparison to the previous week’s inventory rise of 2.3 million barrels and an average daily production of 5.2 million barrels.
A lower interest rate environment is expected to boost demand for all fuels, as it would reduce costs across sectors, including energy and real estate, providing a much-needed stimulus to the economy.
Sara Rathner, co-host of the Smart Money podcast and a personal finance expert for NerdWallet, commented on the Fed’s rate decision, stating, “It’s been a long marathon—the Fed feels it’s time to lower interest rates again. Consumers are definitely feeling the pinch. It’s been this one-two punch of higher interest rates and inflation.”