Oil Prices Dip, but Geopolitical Uncertainty Limits the Decline

After rising by more than 1% in the previous session, oil prices slipped on Wednesday. However, ongoing geopolitical uncertainties provided some support, as traders kept a close eye on expectations that the U.S. Federal Reserve will cut interest rates later in the day.

At 10:42 GMT, Brent crude futures fell 62 cents, or 0.9%, to $67.85 per barrel, while U.S. West Texas Intermediate (WTI) crude futures declined 63 cents, or nearly 1%, to $63.89 per barrel.

The benchmarks had gained over 1% in the prior session, driven by concerns that Russian supply could be disrupted by Ukrainian attacks.

According to a Reuters report on Tuesday, three industry sources said Russia’s pipeline monopoly, Transneft (TRNF_p.MM), had warned producers that they may have to reduce output following drone strikes by Ukraine on key export terminals and refineries.

John Evans, an analyst at PVM Oil Associates, remarked, “If the drone damage to Russian energy infrastructure doesn’t persist for long, the recent $5-per-barrel price boost is likely to return.”

“With sanctions at a stalemate and OPEC increasing supply, the only hope for a sharp rally in oil prices as winter approaches is a tightening in refined stockpiles,” he added.

Peskov: EU Plans Won’t Impact Russia

Kremlin spokesperson Dmitry Peskov said on Wednesday that the European Union’s plans to phase out Russian energy and commodities wouldn’t affect Russia.

Despite existing sanctions, the EU continues to import billions of euros’ worth of Russian energy and goods — ranging from liquefied natural gas to enriched uranium — although imports of Russian oil and gas have dropped significantly.

Investors are also awaiting the outcome of the Federal Reserve’s September 16-17 meeting, which includes new board member Stephen Miran, currently on leave from the Trump administration.

While markets have largely priced in a 25-basis-point rate cut, which could reduce borrowing costs and boost fuel demand, traders are closely monitoring Fed Chair Jerome Powell’s remarks for further direction.

Inventory Data in Focus

Market sources, citing data from the American Petroleum Institute, reported that crude oil and gasoline inventories in the U.S. declined last week, while distillate stockpiles increased.

The market is also waiting for official inventory data from the U.S. Energy Information Administration (EIA), with a Reuters poll of nine analysts forecasting a decline in crude inventories but increases in both distillate and gasoline stockpiles.

Chris Beauchamp, chief market analyst at IG Group, said, “This feels like a pivotal moment for oil prices — reports of widespread bearish bets by funds indicate that concerns about oversupply persist, which could cap upside gains.”

“While Russia continues to test NATO’s resolve, tensions appear to be contained for now, potentially limiting further downside and increasing the likelihood of a test of recent lows,” he added.