After rallying significantly earlier this week, oil prices plummeted by around 2% on Wednesday as markets awaited an interest rate policy announcement from the Federal Reserve before the closing bell.
At 12:55 p.m. ET on Wednesday, Brent crude was trading down 1.68% at $85.91, while WTI, the U.S. crude benchmark, was trading down 2.17% at $81.66.
Later on Wednesday, the Federal Reserve will close out its two-day meeting, with analysts widely anticipating that interest rates will be held steady.
Those rates have been maintained at 5.25% to 5.5%–a 23-year high–since July, though the Fed had anticipated rate cuts this year, depending on the course of inflation.
Later today, the Fed is likely to indicate whether it will still forecast three rate cuts or fewer, as inflation appears to be slowing at a slackened pace compared with Q3 2023.
The Fed will reveal the latest Summary of Economics Projections, the so-called ‘Dot Plot’ charts, which show how policymakers expect economic conditions to develop.
For the past two months in a row, inflation has beaten expectations, indicating that it could settle closer to 3% than 2%, which could affect the number of rate cuts expected this year.
PVM analyst Tamas Varga told Reuters on Wednesday that the fundamentals had not changed and remained “supportive given the ongoing refinery and export problems from Russia”.
Ukrainian strikes have so far taken nearly between 370,000 and 900,000 bpd worth of Russia’s refining capacity offline, depending on which analyst estimates are used.
Ukraine has carried out a string of refinery attacks using drones in the past few weeks, inflicting significant damage –according to Security Services of Ukraine—to 12 oil and gas processing facilities throughout Russia. With Russia’s refining capacity for Q2 now reduced from missile strikes and seasonal planned and unplanned refinery maintenance expected to take place this quarter, the world’s largest fuel exporter could find its revenues curtailed.
By Charles Kennedy for Oilprice.com
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