• Supply concerns help oil recover

• But demand worries are far from vanished

• Traders liquidate positions ahead of Fed meeting

Oil prices have been in a recovery mode since Wednesday, perhaps on supply concerns after Hurricane Francine hit the US Gulf of Mexico, as well as expectations of lower US crude stockpiles.

That said, prices are pulling back today, perhaps as participants considered the aforementioned developments as temporary variables in the oil equation, remaining worried about weakening global demand, especially in China, which is the world’s top crude importer.

The falling dollar due to increasing expectations of a double 50bps rate cut by the Fed tomorrow and a total of 120bps worth of reductions by the end of the year, may have also allowed prices to move higher. However, fears that the Committee may not satisfy the overly dovish market bets may have prompted some buyers to liquidate their positions.

Should the Fed indeed appear less dovish than currently priced in, WTI crude prices may fall below the low of September 10 at $65.70 and aim for the 64.00 area, which stopped prices from drifting further south back in March and May 2023.