Crude oil futures for April delivery pared yesterday's losses to close at $80 a barrel on the New York Mercantile Exchange Wednesday as a weaker dollar and rising equities spurred oil traders to open wallets for the risky energy commodity.
After Tuesday's steep sell off, the price of light, sweet crude oil recovered by more than $1 to settle right at the $80-threshold, while gasoline futures rallied alongside the energy commodity to $2.10, the price per gallon lifted by a noted drawdown in gasoline supplies for the previous week.
March natural gas spot prices at the Henry Hub also moved up slightly at the close of Wednesday's session to $4.82 Mcf.
On Wednesday, the EIA reported a mixed bag of inventory data -- a 3-million barrel build and a less-than-anticipated draw by only 600,000 barrels was bearish news for both crude oil stocks and distillates, respectively. Gasoline data was bullish for energy markets, however, with supplies falling by 900,000 barrels against the API's 1.7 million-barrel build.
Low Interest Rates Bullish for Oil Market
"If you just look at the oil inventory numbers, they were not all that bullish," commented Phil Flynn, senior analyst at Chicago-based PFG Best. "So, today's focus really was on Ben Bernanke and his comments about the economy once again driving prices higher."
Today, U.S. Federal Reserve Chairman Ben Bernanke delivered a testimony reaffirming that the central bank will continue to assist with economic stimulus by keeping the benchmark interest rate at a record low. Following Bernanke's comments, the U.S. currency came under pressure against the Japanese yen, while equities on Wall Street rallied, taking commodities along for the ride.
"When Ben Bernanke said that the economy still needs training wheels, so to speak, it really enforced the perception of low interest rates, and we know the oil market loves 0% interest rates because it keeps prices higher, keeps the dollar lower and has an impact on oil demand to the upside," Flynn added.
As for oil prices sustaining highs near $80, the analyst is doubtful, pointing back to the dollar-oil relationship when the Fed went to quantitative easing last March and its beneficiary -- the euro -- as a case in point for current prices.
"Even if we keep interest rates low for a while, are we going to see the same people running away from the dollar and toward the euro currency as they did last year? Probably not because now we know that Europe is having [financial] problems, too," Flynn contended, underscoring that the dollar may not be as weak this year as it was during last year's battles against the euro.
Most Popular Articles
From the Career Center
Jobs that may interest you