Oil prices fell on Wednesday after two sessions of gains, influenced by weak macroeconomic data and anticipations surrounding the U.S. Federal Reserve's decision on interest rates. The decline in prices countered the potential supply disruption risks due to escalating violence in the Middle East.

Brent crude futures for November dropped 49 cents to $73.21 a barrel, while U.S. crude futures for October slid 50 cents to $70.69 a barrel. Analysts at ANZ noted, Weak macroeconomic data are deepening oil demand concerns. Money managers have turned net negative for the first time since 2011. End of the peak summer demand is also weighing on the market sentiment.

Adding to the bearish sentiment, the American Petroleum Institute reported an unexpected rise in U.S. crude and fuel inventories. U.S. crude stocks increased by 1.96 million barrels for the week ending Sept. 13, as per Reuters, offsetting risks of supply disruptions in the oil-rich Middle East. The figures indicated an overall increase in gasoline and distillate inventories, reflecting weak refinery margins globally.

Mitsuru Muraishi, an analyst at Fujitomi Securities, highlighted that investors are focusing on the Fed's anticipated interest rate cut, which could potentially revive U.S. fuel demand and weaken the dollar. The expectation is a half-percentage-point reduction by the Fed, poised to pressure central bankers into delivering the cut to bolster economic activity.

Hezbollah's reaction to alleged Israeli attacks using explosive-laden pagers in Lebanon has added to the geopolitical risks. The militant group vowed retaliation after the detonations, which Israel has not officially commented on, raised severe concerns about regional stability affecting oil supplies.

While the strategic, economic measure of U.S. oil purchases for the Strategic Petroleum Reserve (SPR) provided some market support, the available funds for refilling the SPR at current low prices seem insufficient. The DOE has just $841 million left to buy crude for the SPR owing to prior measures to release oil from the reserve to stabilize the market during disruptions.

An expert from ClearView Energy Partners emphasized the inadequacy of this budget, stating that it would only cover around 12 million barrels at today's prices. This figure is a stark contrast to the SPR's capacity of approximately 700 million barrels. The Biden Administration's bid to replenish the reserve is faced with significant financial constraints.

Compounding the market complexities, the latest official U.S. inventory data from the Energy Information Administration aligned with earlier reports, showing a crude draw of 1.6 million barrels, which had limited impact on reversing the downward pressure on prices. Investors attributed this drawdown to short-lived weather disruptions.

Oil prices had recovered slightly since reaching their lowest levels since December 2021 but faced resistance at around $75 a barrel. The overall market sentiment remained cautious due to weak global refinery margins that pointed to sluggish demand, as noted by Ole Hansen of Saxo Bank.

Fed's announcement of a significant interest rate cut stoked fears about the broader U.S. economy's health. The strong economic data's inability to mitigate these fears revealed underlying concerns about a potential slowdown in job markets and its longer-term implications on energy demand.

A trader noted, The end of peak summer demand and a negative shift in traders' sentiment have contributed to the price drop, though potential conflicts in the Middle East still pose a risk of supply disruptions. Rising tensions and potential conflict in the Middle East continued to loom over market stability, contributing to a cautious investment approach.

Overall, the oil market's near-term outlook remains wrapped in uncertainties. The interaction between geopolitical tensions, economic measures by the Fed, and real-time inventory data are pivotal factors shaping investor decisions. Analysts and traders will continue watching developments closely, especially potential disruptions and responses from major players in the oil-producing regions.