Oil prices fell on Wednesday, set to snap a two-session rally ahead of a possible U.S. Federal Reserve rate cut, as weak macroeconomic data weighs on demand despite the possibility of more violence in the Middle East.
Brent crude futures for November were down 45 cents, or 0.6%, at $73.25 a barrel by 0458 GMT. WTI oil futures for October were down 48 cents, or 0.7%, at $70.71 a barrel.
Weak macroeconomic data deepens oil demand concerns, with money managers turning net negative for the first time since 2011. The end of the summer peak for demand also weighs on market sentiment.
However, the possibility of more violence in the Middle East, following Israel’s alleged attack on the militant group Hezbollah in Lebanon with explosive-laden pagers, could lead to possible production cuts in the key producing region. Hezbollah vows retaliation against Israel.
Investors are focused on possible Fed rate cuts that could boost U.S. fuel demand and weaken the dollar. They are betting that the Fed will begin a series of rate cuts, expected to be as much as half a percentage point lower on Wednesday. That could put pressure on central bankers for to do just that.
The market also got support from expectations that the U.S. will buy oil for its Strategic Petroleum Reserve (SPR).
Analysts have estimated that crude inventories fell by an average of 500,000 barrels last week. The U.S. Energy Information Administration (EIA) report is due out at 1430 GMT on Wednesday.
