Crude oil futures closed higher for the third consecutive day on Wednesday (22nd) after an official U.S. report showed that U.S. gasoline supply fell by more than 6 million barrels last week.
Crude oil futures rose further in roughly the final half-hour of trading after the U.S. Federal Reserve’s latest interest rate decision. Analysts see Fed officials softening their comments on the outlook for interest rates.
energy commodity prices
- West Texas Intermediate crude (WTI) futures for May delivery rose $1.23, or 1.8%, to settle at $70.90 a barrel, the highest close for front-month WTI futures since March 14.
- May delivery Brent Crude OilFutures rose $1.37, or 1.8%, to settle at $76.69 a barrel, also the highest close since March 14.
- Gasoline futures for April delivery rose 2.1% to settle at $2.5932 a gallon.
- Delivered in AprilHot Fuel FuturesPrices rose 1.9 percent to $2.7403 a gallon.
- Natural gas futures for April delivery fell 7.5% to settle at $2.171 per million Btu.
Fed rate decision
Half an hour before the close of crude oil futures trading, the Fed announced an interest rate decision, raising the benchmark federal funds rate by 25 basis points to a range of 4.75%-5%. US stocks rose, and oil prices also rose sharply and closed higher.
Troy Vincent, senior market analyst at DTN, said this was due to a softening of the central bank’s rhetoric on future rate hikes, supporting the outlook for risk assets.
The Fed statement mentioned that “some additional policy tightening may be appropriate” to bring inflation back to 2%. The wording is different from the previous statement that “continued rate hikes are needed”.
Noah Barrett, research analyst at Janus Henderson Investors, said the Fed signaled that “further rate hikes are likely, but at a slower pace than the recent trajectory.”
“Further rate hikes could be negative for crude prices because it means inflation remains a problem and if higher rates lead to a marked slowdown in economic growth, then that would weigh on oil demand.”
“However, global supply and demand fundamentals remain constructive, coupled with supportive U.S. Energy Administration (EIA) crude oil inventory data and the Fed’s view on interest rates that will slow down interest rate hikes in the future, supporting crude oil gains,” Barrett said.
supply data
DTN’s Vincent said crude oil prices have been volatile over the past week as the lagged effects of tighter monetary policy have started to show, amid fears that tighter credit and problems in the banking sector could spread and fuel a recession. That has led market participants to trim long speculative positions in recent weeks and to increase hedging among producers.
However, the EIA’s weekly oil supply report showed much higher-than-expected demand for gasoline and distillates, “providing fundamental support for a market that has been battered by financial risks of late.”
U.S. domestic demand for fuel remains weak, but surging net fuel exports, combined with strong U.S. crude oil exports, continue to suggest that the global oil market remains healthy relative to the domestic market. “On a 4-week average basis, gasoline and distillate imports were the weakest in five years, while product exports continued to move higher.”
EIA announced on Wednesday that last week (3/17 ended) crude oil inventories rose slightly by 1.1 million barrels.
According to the S&P Global Commodity Insights survey, analysts on average forecast a draw of 5.5 million barrels in crude inventories last week. The American Petroleum Institute (API) announced late on Tuesday that crude inventories rose by 3.3 million barrels last week.
EIA data also showed that gasoline inventories fell by 6.4 million barrels last week, while distillate inventories fell by 3.3 million barrels.
Analysts had expected gasoline inventories to fall by 2 million barrels last week and distillate stocks fell by 1.3 million barrels.
Separately, the EIA said crude inventories at Cushing, Oklahoma, the delivery hub for the New York Mercantile Exchange, fell by 1.1 million barrels last week.
