Oil prices stable as markets eye rate cut decision by U.S. Fed

September 18, 2024

Key points:

• Brent crude oil dropped slightly to $73.67, while U.S. WTI crude oil slid to $71.08.
• Supply disruptions due to Hurricane Francine and geopolitical tensions in the Middle East are keeping prices supported.
• Markets are focused on the interest rate decision by the U.S. Federal Reserve, which could drive fuel demand.

Oil prices held steady after two days of gains, as markets anticipated interest rate cuts by the U.S. Federal Reserve while assessing the ongoing geopolitical risks in the Middle East. Brent crude oil (Symbol: UKOUSD) dropped slightly to $73.542 a barrel, while U.S. WTI crude oil (Symbol: USOUSD) slid to $70.796 a barrel.

Picture: Oil prices flat as the markets wait for Fed rate cut decision, as observed on the VT Markets app.

Looking at the USOUSD-ECN chart, we see crude oil prices slightly supported due to the disruptions in supply caused by Hurricane Francine in the Gulf of Mexico. The moving averages are trending upwards, particularly the 24-period exponential moving average, indicating some sustained buying pressure. The MACD histogram is beginning to show decreasing momentum, suggesting the bullish run might be losing some steam.

However, with a rate cut from the Federal Reserve likely on the horizon, this could shift the narrative toward increased demand, as lower interest rates often stimulate economic activity, potentially boosting oil consumption.

This environment suggests that traders are positioning for a move higher in the near term, although there may be short-term corrections if any economic data points contradict the outlook for easing by the Fed. Support levels around 70.00 remain critical, while resistance at 71.79 could present the next challenge if bullish momentum persists.

Related content: Interest rate tug-of-war for central banks

The market is watching for any potential supply disruptions after Israel allegedly attacked Hezbollah in Lebanon. Escalating tensions could disrupt oil production in the key oil-producing region.

Short term outlook in oil trading

For short-term traders, volatility is expected as markets await the rate decision from the Fed, which could impact the value of the U.S. dollar and, consequently, oil demand. The potential for more violence in the Middle East adds to the uncertainty, and traders should keep an eye on any geopolitical developments that may cause supply disruptions.

Read more about how to trade oil.

With mixed signals from the U.S. oil inventory data, traders should look into the Strategic Petroleum Reserve (SPR) purchases as a potential upward pressure on prices.

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