Crude Gains Modestly As Fed Holds Back
Oil futures prices ended higher Wednesday, but gave up their steepest intraday gains after the Federal Reserve held back from announcing any fresh steps to stimulate the U.S. economy.
Light, sweet crude for September delivery settled 85 cents, or 1%, higher at $88.91 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently settled $1.04, or 1%, higher at $105.96 a barrel.
Nymex crude had risen as high as $89.47 a barrel intraday, buoyed by a report showing a steep drop in U.S. oil inventories. Futures gave up much of those gains, however, following the closely watched statement from the U.S. central bank's policy making body.
"We saw the market come off, I think, on some disappointment that there wasn't anything new," said Andy Lebow, senior vice president of energy futures at Jefferies Bache in New York. Still, expectations of further monetary easing were lower for this meeting than they have been in the past, he said.
At the conclusion of a two-day meeting, the Fed said it will take new steps as needed to boost the economy, but declined to start a new bond-buying program or take other actions. Central bank actions have helped lift oil prices in the past by curbing the dollar, which makes dollar-traded oil more affordable to traders using other currencies.
"The volatility on that release was incredible--crude went negative briefly," said John Kilduff, founding partner of Again Capital, of the Fed announcement.
Traders will now look to the European Central Bank, which could announce easing measures of its own after its meeting Thursday.
Prices were also supported by new inventory data released earlier in the day by the Energy Information Administration showing a much higher-than-expected decline in U.S. crude-oil inventories. Crude-oil stockpiles fell 6.5 million barrels in the week ended July 27, though analysts polled by Dow Jones Newswires had only expected a drop of 800,000 barrels.
The drop was driven largely by a sharp decrease in imports, which fell by 1.2 million barrels a day.
Gasoline stockpiles last week fell 2.2 million barrels, according to the EIA. Inventories of distillates, which includes heating oil and diesel, dropped one million barrels, while refinery utilization fell 0.8 percentage point to 92.2% of capacity.
Analysts expected the EIA to report a 500,000-barrel rise in gasoline stocks. Stocks of distillates, including heating oil and diesel fuel, were seen rising 800,000 barrels. Refinery utilization was expected to fall 0.3 percentage point.
Crude held onto its gains despite a rally in the dollar after the Fed announcement. The Wall Street Journal dollar index, which tracks the greenback against a basket of major currencies, was recently up 0.5% at 72.048.
Front-month September reformulated gasoline blendstock, or RBOB, rose 5.99 cents, or 2.2%, to settle at $2.8342 a gallon. September heating oil rose 1.08 cents, or 0.4%, to settle at $2.8588 a gallon.
Copyright (c) 2013 Dow Jones & Company, Inc.
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