Crude Near 4-Week Low Ahead Of Fed Decision, US GDP

Crude oil is trading near a four-week low on Wednesday as investors remained cautious ahead of the monetary policy announcement from US Federal Reserve officials when they finish their two-day meeting later in the day and the US GDP numbers.

Investors anxiously await the outcome of the Federal Reserve meeting. The central bank might indicate today when the asset purchase program will be cut down. Traders are also looking ahead to Thursday Bank of England and European Central Bank policy meetings.

Also due on Wednesday is the first reading of US second-quarter gross domestic product that will give hints on the outlook for oil demand. The GDP numbers might show that the world’s largest oil consumer continues to grow but very slowly, less than one percent.

- Crude is trading around $103.32 a barrel after rising $0.24

- Brent is trading around $106.85 a barrel after falling $0.06

“All eyes are on the Fed statement, and I think in terms of the short term trajectory for risk assets, that`s going to be the focal point, followed by non-farm payrolls and other US data”, said Ben Le Brun from OptionsXpress

“If there`s any suggestion the Fed is going to taper the current bond buying program as soon as September, then that`s US dollar positive and therefore a negative impact on everything that`s weighed in US dollar”, Le Brun added.

Investors are also awaiting the US crude inventories numbers later in the day, the US non-farm payrolls on Friday and the manufacturing data later this week from China, the world’s second largest oil consumer, which could highlight the outlook for oil demand.

- Natural gas is trading at $3.44 per cubic feet after rising 0.23%

- Gasoline is trading at $3.0109 a gallon after falling 0.25%

- Heating oil is trading at $3.0055 a gallon after falling 0.04%

The American Petroleum Institute showed yesterday that US crude inventories decreased by 740,000 barrels last week, while the Energy Information Administration report later today may show supplies fell by 2.45 million barrels.

Meanwhile, Brent is set to post its biggest monthly rise in eleven months, mainly helped by the gains seen earlier in July amid rising tensions in Africa and the Middle East that kept alive concerns about global oil supplies.

Egypt’s political instability and an escalation of violence in Libya and Iraq are keeping oil prices well above $100 a barrel, offsetting the effect of the rise in US shale oil supply and worries about Chinese demand.