Oil Prices Retreat Ahead of Fed Interest Rate Decision

The S&P Futures index rose by 0.26% this morning as oil prices retreated, calming market sentiment ahead of the Federal Reserve's interest-rate decision.

Data from the American Petroleum Institute showed that US inventories increased by 7.1 million barrels last week, easing immediate supply concerns. However, the closure of Saudi Arabia's East-West pipeline and territorial advances by Iran-backed Houthi militants around the Bab al-Mandeb Strait continued to cast a shadow over the outlook for Gulf supplies.

Treasury yields fell as lower oil prices eased investor concerns about inflation. The 10-year T-note yield dropped two basis points to 4.99%. US rate futures have priced in a 92.5% probability that the Federal Open Market Committee will raise its benchmark policy rate by a quarter point from the current 3.50%-3.75% range.

Market participants will be closely watching Fed Chairman Kevin Warsh's post-decision press conference for clues on whether, if the Fed does raise rates, the move would mark the start of a broader tightening cycle or prove to be a one-off.