WASHINGTON (dpa-AFX) - Partially reversing the huge surge from the two previous sessions, crude oil prices have plummeted on Wednesday as investors analyzed the interest rate announcement by the U.S. Federal Reserve today. In addition, reports of Saudi Arabia loading crude cargoes via Oman lowered supply-related concerns.
WTI Crude Oil for October delivery was last seen trading down by $3.61 (or 3.41%) at $102.22 per barrel.
At the conclusion of its two-day monetary policy meeting, as expected, the U.S. Federal Reserve raised the target range for the federal funds rate by 25 basis points to a range of 3.75% to 4.00% since inflation is well above the Fed's target. This is the first rate hike by the Fed since 2023.
The U.S. Dollar Index was last seen trading at 99.98, up by 0.30 (or 0.30%).
Oil being a dollar-denominated commodity, when the U.S. dollar gains, crude oil becomes expensive for overseas buyers.
Further, a high-interest rate regime slows down economic activity and can reduce fuel consumption, which could lessen the demand for crude oil
Today, citing people familiar with the matter, Reuters reported that Saudi Arabia is offering substantial loadings of crude oil to Asian refiners via ship-to-ship (STS) transfer off Oman's Sohar port.
Citing unnamed traders, Bloomberg reported that Saudi Arabia sold nearly 20 million barrels of crude oil in the spot market so far this week.
Bloomberg also stated that Aramco is working to restore at least half of its capacity within days, with full restoration targeted to happen in around six weeks.
The world's biggest crude oil exporter Saudi Arabia utilized its 1,200 km East-West pipeline to transport its crude to the Red Sea port of Yanbu, thereby bypassing the Strait of Hormuz.
However, following last week's drone attacks on the pipeline by Iran-backed Houthi militants, Saudi Arabia announced closing the line.
Citing two regional officials, the Associated Press reported that restoration process could take nearly five weeks.
Yesterday, U.S. Energy Secretary Chris Wright stated that the line could be back in service within a few days. Wright observed that Saudi Arabia is trying to transport crude through the Strait of Hormuz with U.S. military assistance.
Last Friday, the member nations of the Gulf Cooperation Council agreed to meet Iranian senior leaders to discuss the U.S.-Iran crisis.
The meeting was scheduled to be held on Monday in Oman. However, late Sunday, Oman announced the cancellation of the meeting.
The Iran-aligned Houthi militants seized the islands of Greater and Lesser Hanish, marking progress in their attempt to fully takeover the Bab el-Mandeb Strait.
Citing Kpler's data, Reuters reported that vessel transits through the Strait of Hormuz remained in the single digits at four on Tuesday.
Uncertainty over the Strait of Hormuz reopening, the closure of the East-West pipeline, the cancellation of the GCC-Iran meeting, and the advances made by Houthis drove oil prices to more than $105 per barrel yesterday.
On the inventory front, data from the American Petroleum Institute revealed that crude oil inventories increased by 7,140,000 barrels for the week ending September 11 following a 300,000-barrel decline of the previous week.
According to the U.S. Energy Information Administration, for the week ending September 11, crude oil inventories decreased by 640,000 barrels. At Cushing's Oklahoma Delivery Hub, inventories decreased by 342,000 barrels.
For the same period, while gasoline inventories increased by 794,000 barrels, distillate inventories (which include diesel and heating oil) increased by 1,585,000 barrels, and heating oil inventories increased by 684,000 barrels.
As of today, the national average price of gasoline hovers around $4.3672 per gallon, according to data from the American Automobile Association.
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