Oil prices are affected by supply problems, but the Fed’s rate hike has been the biggest gainer in Reuters

© Reuters Palm jacks are seen at sunset at the Daqing oil field in Heilongjiang province, China, August 22, 2019. REUTERS/Stringer

By Isabel Qua

SINGAPORE (Reuters) – Oil prices rose on Wednesday on supply concerns, but expectations of another sharp U.S. interest rate hike could lead to higher profits for investors and hurt oil demand.

Futures were up 11 cents, or 0.1%, at $90.73 a barrel by 0415 GMT, after falling $1.38 the previous day.

U.S. West Texas Intermediate crude was at $83.99 a barrel, up 5 cents, or 0.1 percent. The October delivery contract fell $1.28 on Tuesday and the more active November contract lost $1.42.

“The issue of brutality caused by sanctions against Russia is always an incomplete issue,” said Tina Teng, an analyst at CMC Markets. “The Iran nuclear deal has faced obstacles, which will not lead to more supply in the near future.”

The United States said at the UN General Assembly this week that it did not expect progress on renewing the 2015 Iran nuclear deal, which would reduce the chances of Iran’s barrels returning to the international market.

The OPEC+ producer group — the Organization of the Petroleum Exporting Countries and allies including Russia — is now falling a record short of its output target of 3.58 million barrels a day, or about 3.5% of global demand. The shortage highlights supply tightness in the market.

But oil prices remained under pressure due to further increases in US bond yields, which pushed the dollar higher ahead of the Fed’s rate decision, Teng added.

The Fed is widely expected to raise rates by 75 basis points for the third time in a row later on Wednesday in an effort to control inflation.

Other central banks, including the Bank of England, will also meet this week.

“In the absence of any major fresh developments in fundamentals, crude is under the influence of a sombre mood in the broader financial markets,” said Vandana Hari, founder of Vanda (NASDAQ: ) Insights in Singapore.

Stocks fell in Asia and bond yields rose on Wednesday as investors braced for the Fed’s decision on the day.

The dollar hovered at a two-decade high against a basket of currencies on Wednesday, making oil more expensive against other currencies. [FRX/]

Meanwhile, oil inventories increased by 1 million barrels for the week on September 16, citing figures from the American Petroleum Institute on Tuesday.[API/S]

U.S. crude oil inventories were estimated to have risen by around 2.2 million barrels last week on September 16, according to an extended Reuters poll.

Saudi state oil giant Aramco (Tadawul: ) warned on Tuesday that the world’s excess oil production capacity could be used up quickly as the global economy recovers.

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