Oil rises on a Gulf storm threat as Treasury prices fall before a 10-year sale

Oil is above $100 a barrel ahead of the US market open on Wednesday, amid a Gulf storm threat, while long-term US government bond prices are down in anticipation of a $39 billion sale of 10-year notes.

Brent, the international benchmark for oil prices, was at $101.96, up 1.4% on Tuesday's close. West Texas Intermediate, the US benchmark, was at $90.05, up 0.7%. A fund that tracks US crude oil, BUSO, was indicated 0.7% higher in premarket trading.

US forecasters said on Tuesday that a storm in the Gulf of Mexico would become the first Atlantic hurricane of 2026 within two days, and would likely hit oil and gas facilities. Offshore fields in its path produce 15% of US oil.

"An unwelcome complication for crude, raising the prospect of production and refining disruptions at a time when the market already has enough supply-side headaches," said Tim Waterer, chief analyst at KCM Trade.

Further price pressure came from clashes between Saudi Arabia and Yemen's Houthis, which escalated on Monday evening when the Saudi aviation authority said airports in Jazan and Najran were attacked. ING's commodity strategists said supply risks from the Middle East were still very real, because attacks on ships had continued.

The head of Vitol said about 12 million barrels a day of crude, and 2 million of refined products, had left the Middle East by tanker over the past seven to 10 days. Oil is higher this morning even with that much crude still leaving the region. Those shipments are a reason not to call this a shortage yet.

The weekly US inventory report is due at 10:30 a.m. Eastern. It covers the week ended October 2, which was before Tuesday's forecast, so it cannot measure storm damage. Industry data from the American Petroleum Institute, cited Tuesday, put the draw in US crude stocks for that week at 2.09 million barrels. The official figure will be read against that draw.

Long-term Treasury prices were lower before the open. The fund that holds those bonds, BTLT, was indicated 0.8% lower in premarket trading. The 10-year yield ended Tuesday at 5.27%.

On Tuesday the Treasury sold $58 billion of three-year notes at 4.932%, just under half a percentage point above the 4.474% at last month's sale. Buyers offered $2.62 for every dollar of notes sold, against $2.72 then. Demand was only a little lighter. The yield was much higher.

Today the Treasury sells $39 billion of 10-year notes, and on Thursday $22 billion of 30-year bonds. A 10-year note locks in the rate for longer, so this sale is a sharper test of whether the yield is high enough.

The Reserve Bank of India raised its policy rate by a quarter of a percentage point, to 5.50%. Governor Sanjay Malhotra announced a unanimous decision, the first increase since February 2023, and a shift from a neutral stance to tighter policy, which the bank called calibrated tightening. The bank said renewed fighting in West Asia, and the sharp swings in crude prices that followed, had left the global outlook unsettled.

At 2 p.m. Eastern the Federal Reserve publishes minutes of its September 15-16 meeting, when it raised its target range by a quarter point, to 3.75% to 4%. CME FedWatch, which reads the odds from interest-rate futures, put the chance of an October hike at 20.5%, from about 51% a week ago, and the chance of a December hike at 84.5%. The next decision is October 27-28.

The minutes are the account of how another increase was debated. In those futures, an October increase is no longer the likely outcome, and a December increase still is.

Around midday in Europe, the Euro Stoxx 50, a benchmark of big eurozone stocks, was down 1.2%, while overnight South Korea's Kospi fell 2% and Japan's Nikkei 225 fell 0.9%. The fund that holds the S&P 500, ASPY, was indicated 0.2% lower in premarket trading, and the fund that holds the Nasdaq-100, AQQQ, was indicated 0.6% lower.

The 10:30 a.m. report can only say whether last week's crude stocks fell by more than 2.09 million barrels. The $39 billion sale has to say whether buyers will take 10-year debt while oil is above $100 and a December rate increase is still the likely next move.