By: Economy Middle east

Oil prices remained steady in early trading on Wednesday following a rise of more than 1 percent in the previous session, which was triggered by drone attacks on Russian ports and refineries. 

Traders are now looking ahead to the Federal Reserve’s anticipated interest rate cut. 

Brent crude futures dipped by 0.16 percent to $68.36 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell by 0.12 percent to $64.44 a barrel. The gains from the prior session reflected market apprehensions about possible disruptions to Russian oil supply due to escalating Ukrainian drone strikes targeting essential Russian oil infrastructure. Concurrently, investors are closely monitoring the Federal Reserve’s September meeting, which is widely expected to result in a 25 basis point rate cut, a move likely to stimulate the economy and boost fuel demand.

Impact of drone attacks on Russian oil supply

The recent surge in oil prices was primarily fueled by the escalation of Ukrainian drone attacks targeting Russia’s energy infrastructure in 2025. These strikes have hit crucial refineries and export ports essential to Russia’s oil production and export capabilities. Notably, refineries such as Kirishi in the Leningrad region and Ryazan, each with daily processing capacities exceeding 300,000 barrels, have sustained significant damage, necessitating production adjustments. Export terminals at Primorsk and Ust-Luga, which are vital for Baltic crude shipments, have also experienced operational disruptions. Russia’s state-owned pipeline operator, Transneft, has warned producers of potential production cuts due to these attacks, further exacerbating global supply concerns.

These attacks seek to weaken Russia’s energy revenue streams, which are vital for its military operations, effectively exerting economic pressure amid ongoing geopolitical tensions. While the damage is considerable—affecting approximately 15-20 percent of western refining capacity—short-term global shortages are unlikely, as Russia accounts for about 9 percent of global oil production and other producers can partially mitigate supply gaps. However, the attacks have already resulted in domestic fuel prices in affected Russian regions rising by 10-15 percent, with temporary rationing implemented in some instances.

EU’s accelerated phase-out of Russian fossil fuels

On September 16, European Commission President Ursula von der Leyen unveiled plans to accelerate the EU’s phase-out of Russian fossil fuel imports. This initiative builds on existing efforts to diminish reliance on Russian coal and crude oil, with coal imports ceasing in 2022 and crude oil imports plummeting from 27 percent in 2021 to just 3 percent in 2024. The Commission’s new proposals emphasize legal obligations for member states and private entities to hasten the phase-out of Russian natural gas and oil imports, targeting a complete cessation of Russian oil imports by 2027 and natural gas by 2028. These measures are designed to increase economic pressure on Russia while ensuring the EU’s energy stability. 

U.S. Fed rate cut and oil market dynamics

The oil market’s reaction to the Federal Reserve’s impending rate decision is keenly observed, as a 25 basis points interest rate cut is widely expected. Lower interest rates generally encourage economic activity by reducing borrowing costs, which in turn stimulates fuel demand across transportation, manufacturing, and other sectors. Historically, Fed rate cuts have supported oil prices by boosting consumption and investment in energy sectors. However, the relationship is complex, influenced by factors like inflation, currency fluctuations, and broader economic conditions. 

The Fed meeting in September is also significant politically, with new governor Stephen Miran, formerly of the Trump administration, joining deliberations while another policymaker, Lisa Cook, faces political pressures. The rate cut’s potential to stimulate demand comes at a time when U.S. crude and gasoline inventories recently declined, supporting price stability. According to American Petroleum Institute data, crude stocks fell by 3.42 million barrels and gasoline inventories dropped by 691,000 barrels for the week ending September 12, partly offset by a 1.91 million barrel rise in distillate stocks. The market awaits the U.S. Energy Information Administration’s official inventory data to confirm these figures, which will be influential in near-term price directions. 

U.S. oil inventory trends and production

U.S. crude oil inventories have seen notable fluctuations in recent weeks. Despite a recent draw in inventories, stocks remain close to historical seasonal norms. For example, recent Inventory reports showed crude oil stocks fell, while gasoline stocks experienced modest declines. However, distillate stocks, which include heating oil and diesel, have increased, which can temper overall demand impressions. U.S. domestic production remains high, close to record levels of around 13.4 million barrels per day, contributing to ample supply even as refinery utilization fluctuates. 

From a technical perspective, Brent crude oil prices show signs of a short-term bullish trend, supported by moving averages and price movements, but face significant resistance levels around $67.55 per barrel. Forecasts suggest a potential testing of this resistance with the risk of renewed downward pressure below $64.35 if the resistance holds. A breakout above $69.55 could signal a stronger upward momentum, potentially pushing prices above $76.05. However, uncertainty remains due to geopolitical risks and economic data releases.