Oil prices weakened on Wednesday after data showing rising US diesel stockpiles fueled demand concerns and the US Federal Reserve cut interest rates as expected.

Brent crude futures closed 52 cents, or 0.76%, lower at $68.22 a barrel, while US West Texas Intermediate crude fell 47 cents, or 0.73%, to $64.05.

US crude inventories fell sharply last week, driven by a surge in exports and a sharp decline in imports, according to the Energy Information Administration (EIA) on Wednesday. However, rising distillate stockpiles fueled demand concerns and kept prices in check, analysts said.

"It seems like the market is responding to diesel, which is the most vulnerable sector of the entire complex," said Phil Flynn, senior analyst at Price Futures Group. The US Federal Reserve on Wednesday cut interest rates by a quarter percentage point as expected and indicated it would continue lowering borrowing costs through the end of the year, as policymakers address concerns about a weakening economy.

"This is not unexpected," said Phil Flynn, senior analyst at Price Futures Group. "The market is playing both sides of the coin right now." On the supply side, Kazakhstan resumed oil supplies through the Baku-Tbilisi-Ceyhan pipeline on September 13, state energy company Kazmunaygaz said on Wednesday. Supplies were halted last month due to contamination concerns.

In Nigeria, President Bola Tinubu on Wednesday lifted six months of emergency rule in Rivers, a state located in Nigeria's crude export hub. Risks to Russian oil supplies have also come into focus after Ukrainian attacks on Russian energy infrastructure intensified in recent weeks.

Russian oil pipeline monopoly Transneft warned producers they may have to cut production after Ukrainian drone attacks on key export ports and refineries, three industry sources told Reuters on Tuesday. (alg)

Source: Reuters