Oil prices fall from the highest level in ten months as traders anxiously await the US Federal Reserve’s interest rate announcement later Wednesday.

A barrel of the European reference oil, Brent, costs USD 93.24 on Wednesday morning, compared to 95.39 on Tuesday afternoon. At the same time, US WTI oil is trading at USD 90.25 dollars compared to 92.72 on Tuesday afternoon.

Prices are falling despite a larger than expected decline in US crude oil inventories last week of 5.25 million barrels compared to an estimated 2.2 million barrels according to Reuters. At the same time, US shale oil production is on track to fall to 9.393 million barrels in October which would be the lowest level since May this year.

The US Federal Reserve is expected to keep interest rates unchanged on Wednesday evening, but the outlook for monetary policy in the short term is less clear. It is this uncertainty that is contributing to the surge in oil prices. This is because higher interest rates and tighter monetary policy will mean less activity in the global economy and thus lower oil demand.

”Oil price increases have been paused as every trader is holding their breath ahead of the Federal Reserve’s interest rate announcement, which is the key determinant of whether the US economy will have a hard or soft landing,” Edward Moya, senior market analyst at data analytics firm OANDA, tells Reuters.

However, many analysts emphasize that the commodity market is characterized by greater demand than supply which will continue in the short term. Therefore, several analysts expect both Brent and WTI oil to continue to reach over USD 100 per barrel later this year.

In the rest of the commodity market, a troy ounce of gold costs USD 1,930.49 on Wednesday morning, compared to USD 1,933.95 on Tuesday afternoon.

(Translated by DeepL with additional editing by Christian Radich Hoffman)