Oil prices rise ahead of expected Fed rate hike as US crude inventories fall

  • U.S. crude inventories down 3 million barrels – EIA
  • The market awaits the Federal Reserve
  • Supply set to tighten in coming months due to sanctions, OPEC+

NEW YORK, Nov 2 (Reuters) – Oil prices rose on Wednesday ahead of a rate hike expected by the Federal Reserve, supported by a further drop in U.S. oil inventories as refineries resumed activity ahead of the season winter heating.

Brent crude rose $1.74, or 1.8%, to $96.39 as of 12:01 a.m. EDT (1601 GMT), while U.S. West Texas Intermediate (WTI) crude rose 1. $95, or 2.2%, to $90.31 a barrel.

The broader market is expected to remain somewhat subdued ahead of the US Federal Reserve’s post-meeting announcement at 2:00 p.m. EDT (1800 GMT), when the central bank is expected to make its fourth 75 basis point interest rate hike. .

U.S. crude oil inventories fell about 3.1 million barrels on the week, according to federal data. Gasoline inventories fell, while distillate inventories rose only slightly ahead of the key heating season when demand is expected to pick up.

U.S. inventories remain low for most commodities, worrying analysts who believe the impending end to U.S. strategic reserve releases will remove a source of supply that will further tighten markets.

“With each passing week, the United States draws on hydrocarbon inventories, raising questions about where the industry turns when there is no more supply from the releases of strategic petroleum reserves. “said Andrew Lipow, president of Lipow Oil Associates in Houston. . “That’s why we see oil prices being supported.”

Production by the Organization of the Petroleum Exporting Countries (OPEC) fell in October for the first time since June, in addition to pumping 1.36 million barrels per day below its targets.

The potential disruption of the European Union’s embargo on Russian oil which is due to start on December 5 could also push prices higher. The ban, a reaction to Russia’s invasion of Ukraine, will be followed by a halt in imports of petroleum products in February.

China’s zero-COVID policy has been a main factor in keeping the price of oil contained, as repeated lockdowns have slowed growth and reduced demand for oil.

An unverified social media post said the Chinese government would consider ways to ease COVID-19 rules from next March, potentially increasing demand for the world’s second-largest oil user.

“Despite slowing economies and China’s COVID-19 woes, there is a good chance that lack of supply will trump near-term demand concerns. Therefore, expect what oil prices close out this year to head into triple-digit territory,” he added. PVM analyst Stephen Brennock said.

Reporting by David Gaffen; additional reporting by Shadia Nasralla and Scott DiSavino; edited by Elaine Hardcastle and Grant McCool

Our standards: The Thomson Reuters Trust Principles.

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Thomson Reuters

David Gaffen oversees a North American oil and gas writing and reporting team; he previously worked at The Wall Street Journal and TheStreet.com

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