NEW YORK: Oil prices were steady in volatile trade on Wednesday as the market waited for direction from the US Federal Reserve after first rising on worries about a Russian troop mobilization and dropping on a strong US dollar and lower US gasoline demand.
The US Federal Reserve was expected to announce its third straight interest rate hike of 75 basis points Wednesday afternoon, which could further sink fuel demand.
Brent futures fell 24 cents, or 0.3%, to $90.38 a barrel by 1:20 p.m. EDT (1720 GMT), while US West Texas Intermediate (WTI) crude fell 35 cents, or 0.4%, to $83.59.
That would be the lowest closes for both benchmarks since Sept. 8.
US gasoline demand over the past four weeks fell to 8.5 million barrels per day (bpd), its lowest since February, according to the US Energy Information Administration (EIA).
“The stand-out data point is the continuing weakness in gasoline demand. It’s really what’s been haunting this market,” said John Kilduff, partner at Again Capital LLC in New York.
The US Energy Information Administration reported a 1.1 million barrel increase in crude stocks last week, smaller than the 2.2 million barrel build analysts forecast in a Reuters poll. On Tuesday, the American Petroleum Institute (API) industry group reported a roughly 1.0 million barrel increase in crude stocks in the week to Sept. 16.
Analysts at energy consulting firm Ritterbusch and Associates said oil prices rose early in the session “largely off Putin’s apparent escalation of the Ukraine war,” but were being held down by a “strong dollar and expected higher US interest rates.” Russian President Vladimir Putin called up 300,000 reservists to fight in Ukraine and backed a plan to annex parts of the country, hinting he was prepared to use nuclear weapons.
US President Joe Biden accused Russia of making “reckless” and “irresponsible” threats to use nuclear weapons.
Oil prices soared to a multi-year high in March after the Ukraine war broke out. European Union sanctions banning seaborne imports of Russian crude will come into force on Dec. 5.
The dollar was on track for its highest close in over 20 years against a basket of other currencies, making oil more expensive for buyers using other currencies.
Signs of a recovery in Chinese demand gave prices a lift early in the session.
In the United States, however, the economic news was not so good. Existing home sales dropped for the seventh straight month in August as affordability deteriorated further amid surging mortgage rates.
In Europe, “government are increasingly intervening in energy markets in an attempt to stave off economic crisis,” analysts at energy consulting firm EBW Analytics said in a note.
Germany agreed to nationalize natural gas company Uniper SE, while the British government said it would cap wholesale electricity and gas costs for businesses.