Oil Prices Drop Ahead of FOMC Meeting as Markets React to Inventory Data

Market Snapshot:

• S&P 500 declines 0.6%
• Nasdaq drops 1.1%
• WTI crude oil falls $4.12 to $76.63
• US 10-year Treasury yields slip 3 basis points to 4.44%
• Euro strengthens, Swiss franc underperforms
• Gold rises $26 to $4,333 per ounce

Oil prices extended their downtrend on Tuesday, with West Texas Intermediate crude slipping another $4. Following the market close, the American Petroleum Institute reported a larger-than-expected drop in US oil inventories, signaling sustained supply tightness amid stalled negotiations for a production agreement, which remains unresolved until Friday. Market participants remain divided between optimism over potential supply resumption and concerns over long-term demand dynamics.

The cross-asset reaction to the oil decline proved muted, with US Treasury yields falling only 2-3 basis points and foreign exchange markets showing limited movement. Energy sector equities mirrored this caution, as the XLE ETF dipped just 0.3%, reflecting investor skepticism about near-term price recovery.

Equity markets saw profit-taking pressure, particularly in the Nasdaq, where technology shares faced headwinds. Intel shares tumbled 8% amid technical selling pressure, forming a potential double-top pattern. Micron Technology also declined 6%, while Broadcom and Nvidia closed lower. Meanwhile, SpaceX shares surged as much as 20% intraday before settling with a 4.8% gain.

Market volatility may ease ahead of Wednesday’s Federal Open Market Committee meeting—the first under Governor Kevin Warsh—which could provide clarity on monetary policy direction and economic outlook.

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