Oil falls to a three-week low as concerns about potential interest rate increases grow.

 Oil falls to a three-week low as concerns about potential interest rate increases grow.

Raising interest rates to combat inflation may hinder economic expansion and reduce demand for oil.

Oil falls to a three-week low as concerns about potential interest rate increases grow.

After the US Federal Reserve held interest rates unchanged as anticipated but highlighted that it needed to leave the door open for potential future rate rises owing to the robust US economy, oil prices slid roughly 1% to a three-week low.

Raising interest rates to combat inflation may hinder economic expansion and reduce demand for oil.

By 2:13 p.m. EDT (1813 GMT), Brent futures had down 39 cents, or 0.5%, to $84.63 a barrel, while US West Texas Intermediate (WTI) oil had dropped 66 cents, or 0.8%, to $80.36.

As a result, WTI is headed for its lowest closing since August 28 and Brent is headed for its lowest close since October 6.

The fact that both futures were expected to end below their 100-day moving averages, a crucial level of technical support since July, was also observed by traders.

On concerns about the Middle East, both benchmarks had risen more than $2 a barrel earlier in the day.

The Federal Reserve (Fed), which began hiking interest rates in March 2022, kept rates unchanged but opened the door for further increases in borrowing costs because of the robust U.S. economy.

According to a Eurostat flash estimate, October inflation in the Euro zone was at its lowest point in two years, supporting the theory that interest rate hikes by the European Central Bank are unlikely to occur anytime soon. On Thursday, the Bank of England is anticipated to convene.

A private study revealed that manufacturing activity unexpectedly fell in October in China, the world's top oil importer. These results added to the negative government statistics released the previous day.

According to the U.S. Energy Information Administration (EIA), energy companies increased their crude stockpiles by 0.7 million barrels during the week that ended on October 24. This figure was less than the 1.3 million barrels that industry group API reported the day before and the 1.3 million barrels that analysts had predicted in a Reuters poll.

Energy traders found little use for this EIA report. No significant changes were prompted by a somewhat larger construction and inconsistent demand, according to a report from senior market analyst Edward Moya of the data and analytics company OANDA.

Mid-East Concerns

"The oil market will remain captivated with the deteriorating demand prognosis and if any of the latest developments concerning the Israel-Hamas war will lead to any supplying disruptions," Moya of OANDA said.

According to a source and Egyptian media, a first wave of wounded Gaza residents were flown to Egypt as Israeli troops continued their offensive on Hamas terrorists.

According to state media, Iran's Supreme Leader, Ayatollah Ali Khamenei, demanded that Muslim countries stop exporting food and energy to Israel and stop its shelling of the Gaza Strip.

According to U.S. energy statistics, Iran, a member of the Association of the Petroleum Exporting Countries (OPEC), produced approximately 2.5 billion barrels of crude oil per day in 2022.

According to Investec's head of commodities, Callum Macpherson, "oil may have trouble to sustain prices around recent highs any support from OPEC+ into 2024, making the group's meeting later this month crucial." This is assuming that the conflict poses no danger to production.

(Editing by Muralikumar Anantharaman, Jason Neely, Louise Heavens, Jonathan Oatis, David Gregorio, by Cynthia Osterman; reporting by Scott DiSavino as well as Nicole Jao in New York, Shariq Khan in Bengaluru, Natalie Grover in London, Mohi Narayan in New Delhi, as well as Emily Chow in Singapore)