U.S. crude oil prices fall ahead of pivotal Fed decision on interest rates

U.S. crude oil fell Wednesday ahead of the Federal Reserve’s pivotal decision on interest rates later this afternoon.

“In theory a rate cut is supportive for oil prices but we’ve seen prices rallying in recent days, likely pricing this in already, hence the response may be muted,” said Matt Smith, lead oil analyst for the Americas at Kpler.

The oil market has been rattled this month by worries about a growing imbalance between supply and demand. The U.S. benchmark is down more than 13% in the third quarter, while global benchmark Brent has fallen more than 15%.

Here are Wednesday’s energy prices:

• West Texas Intermediate October contract: $70.65 per barrel, down 54 cents, or 0.8%. Year to date, U.S. crude oil is down more than 1%.
• Brent November contract: $73.16 per barrel, down 54 cents, or 0.7%. Year to date, the global benchmark has fallen about 5%.
• RBOB Gasoline October contract: $1.9855 per gallon, down 0.8%. Year to date, gasoline has dropped more than 5%.
• Natural Gas October contract: $2.369 per thousand cubic feet, up 1.9%. Year to date, gas has pulled back more than 5%.

Consumption in China is slowing as electric vehicle sales surge in the world’s largest crude importer. At the same time, OPEC+ is expected to increase production in December as output in the U.S., Canada, Brazil and Guyana remains strong.

Bulls are hoping that a decision by the Fed to cut interest rates for the first time in years could put a bid into the market. Lower interest rates typically stimulate economic growth, which boosts oil demand.

Andy Lipow, president of Lipow Oil Associates, said a 25 basis point cut is probably already priced into the oil market. “A 50 basis point cut is slightly supportive of the oil market since it translates into a weaker dollar and stronger prices for dollar denominated commodities,” Lipow said.

Geopolitical tensions are also escalating in the Middle East again as fears grow that a major conflict between Israel and the Iran-backed militia Hezbollah is on the horizon. Hundreds of pagers exploded in Lebanon Tuesday in an attack targeting Hezbollah militia members.

Traders are also waiting for the latest data on U.S. crude oil inventories at 10:30 am ET.