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Concerns over potential Russian supply disruption support

prices

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Markets eye Fed meeting for clues on economy

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US crude stockpiles fell last week, industry data shows

By Sam Li and Lewis Jackson

Sept 17 (Reuters) - Oil prices held steady in early

trading on Wednesday, after rising more than 1% in the previous

session on drone attacks on Russian ports and refineries, while

traders awaited an expected rate cut from the U.S. Federal

Reserve.

Brent crude futures dropped 1 cent to $68.46 a

barrel by 0114 GMT, while U.S. West Texas Intermediate crude

futures also fell 1 cent to $64.51 a barrel.

Reuters reported on Tuesday that three industry sources said

Russia's oil pipeline monopoly Transneft (TRNF_p.MM) has warned

producers they may have to cut output following Ukraine's drone

attacks on critical export ports and refineries.

Oil prices settled more than 1% higher in the last trading

session due to concerns Russian supply may be disrupted.

Meanwhile, European Commission President Ursula von der

Leyen said on Tuesday the commission will propose speeding up

the phase-out of Russian fossil fuel imports and called for

strengthening efforts to increase economic pressure on Russia.

Investors are also awaiting the outcome of the Federal

Reserve's September 16-17 meeting, with a new governor, Stephen

Miran, on leave from the Trump administration, joining the

deliberations, and a second policymaker, Lisa Cook, still facing

efforts by President Donald Trump to oust her.

The central bank is widely expected to cut interest rates by

25 basis points on Wednesday, which should stimulate the economy

and boost fuel demand.

However, the market's focus will be on "how many members

join Stephen Miran in dissenting in favour of a 50-basis point

rate cut", whether its outlook indicates two or three 25-basis

point cuts and "the tone of Fed Chair Powell during the press

conference", said IG market analyst Tony Sycamore.

Any "buy-the-rumour, sell-the-fact" reaction in risk assets,

including crude oil, will be short-lived, given the possibility

of follow-up 25-basis point rate cuts in October and December,

Sycamore said.

In a potentially bullish sign, data on Tuesday showed U.S.

crude and gasoline stocks fell last week, while distillate

stocks rose, market sources said, citing American Petroleum

Institute figures.

Crude stocks fell by 3.42 million barrels, and gasoline

inventories fell by 691,000 barrels in the week ending September

12, while distillate inventories rose by 1.91 million barrels

from the prior week, the sources said.

The market will be watching to see whether data from the

U.S. Energy Information Administration on Wednesday matches

that.

A Reuters poll showed analysts estimated crude inventories

fell by about 900,000 barrels last week, distillate stockpiles

rose by about 1 million barrels and gasoline stockpiles rose by

about 100,000 barrels.