International crude oil prices fell on Wednesday, September 18, as the market cautiously awaited the US Federal Reserve rate cut verdict while investors digested a mixed crude and fuel storage report out of the United States.

Brent crude futures for November last shed 55 cents, or 0.8 per cent, at $73.15 per barrel after hitting a three-year low last week. US crude futures shed 53 cents, or 0.7 per cent, to $70.66. Back home, crude oil futures last traded 0.12 per cent higher at ₹5,20 per barrel on the multi-commodity exchange (MCX).

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What's weighing on crude oil prices?

-Crude inventories fell by 1.6 million barrels to 417.5 million barrels in the week ending September 13, said the Energy Information Administration (EIA). While the EIA's report was more supportive of oil prices than American Petroleum Institute figures, investors likely considered the crude drawdown to be affected by last week's Hurricane Francine.

-Gasoline and distillate inventories, meanwhile, rose slightly last week. The US Federal Reserve is expected to make its first interest rate cut in over four years, with markets pricing in a 63 per cent chance of a 50 basis-point reduction.

-Brent has staged a recovery since falling below $70 to its lowest since December 2021 on September 10. Analysts said Brent crude faces resistance at around $75 due to weak global refinery margins that signal sluggish demand.

-Earlier in the session, oil found some support from risks of increased violence in the Middle East disrupting supply after Hezbollah accused Israel of attacking the militant group with explosive-laden pagers in Lebanon. Hezbollah promised to retaliate against Israel, whose military declined to comment on the blasts.

-Analysts also said the end of peak summer demand and a negative shift in traders' sentiment have contributed to the price drop, though potential conflicts in the Middle East still pose a risk of supply disruptions

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Where are prices headed?

Analysts said crude oil gained in international markets amid heightened expectations of a larger US Fed rate adjustment and renewed tensions in the Middle East. The anticipated US Fed rate cut could boost oil demand in the coming month, supporting crude oil prices at lower levels. 

‘’For crude oil... momentum remains positive till prices are key supports at 5,880/ 5,830, while on the upside prices may test 6020/ 6080 levels,'' said Pranav Mer, Vice President, EBG - Commodity & Currency Research, JM Financial Services Ltd.

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Prices surged following supply disruptions caused by Hurricane Francine, which halted approximately 12 per cent of oil output from the Gulf of Mexico last week. Escalating tensions in the Middle East are also expected to support crude oil prices. 

‘’Weaker-than-expected US retail and core retail sales data for August have capped potential gains. We expect crude oil prices to remain volatile. Crude oil has support levels at $68.80-$68.10, with resistance at $69.90-$70.50. In INR terms, crude oil has support at ₹5,910- ₹5,840, and resistance at ₹6,065- ₹6,120," said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

 

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