Oil Rises After Supply Data, Before Fed Decision

U.S. crude-oil futures trimmed their losses in electronic trade Wednesday after mixed news from weekly inventory data, though the Federal Reserve decision remained the key factor for the day ahead.

After dropping 1.1% in the previous day’s New York Mercantile Exchange session, October crude oil  rebounded modestly by 24 cents, or 0.2%, to $105.66 a barrel.

However, rival European benchmark November Brent crude  extended losses by 19 cents, or 0.2%, to $108 a barrel, on top of a 1.7% drop Tuesday on ICE Futures.

The mild gains for Nymex crude began as the American Petroleum Institute reported a 300,000-barrel drop in U.S inventories for the week ended Sept. 13, according to Citi Futures.

The result was well below expectations for a drawdown of 1.5 million barrels, as reported in a Platts survey of analysts, but the data also showed a more substantial 900,000-barrel decrease for stocks at Cushing, Okla., the delivery point for Nymex crude-oil futures.

Although the market rose on the data, Citi Futures energy analyst Timothy Evans said the numbers would still “count as a smaller overall decline than anticipated,” assuming they’re confirmed by the more definitive Energy Information Administration report, due later Wednesday at 10:30 a.m. Eastern time.

“And with locations outside of Cushing apparently netting to a 600,000-barrel build despite an unexpected increase in the refinery operating rate, it will make it hard to argue that refiners will need to restock on crude oil, particularly with seasonal maintenance turnarounds due to begin,” Evans wrote late Tuesday.

As for Brent futures, Commerzbank said the prices, though headed lower, would see some support from Libyan outages and the lingering possibility of a U.S. attack on Syrian government targets.

“The still numerous supply outages and the residual risk of a renewed escalation of the Syrian crisis are likely to preclude any sharper fall in prices, so we do not envisage any prolonged price slide,” the Commerzbank analysts wrote Tuesday.

“We therefore initially anticipate a moderate downward trend — though the Fed’s mid-week meeting could bring about more pronounced price movements,” they wrote.

The Fed’s policy decision — including the possible announcement of a tapering of its bond-buying and forecasts for interest rates, as well as a post-meeting press conference — had the potential to overshadow other developments in the oil market.

In particular, a sharp move for the U.S. dollar  would be likely to affect dollar-denominated crude by raising or lowering the price of oil for holders of other currencies.

Like most economists, BK Asset Management managing director Kathy Lien expects the Fed to cut the level of its bond-buying program, but she also said the U.S. central bank may attempt to add a dovish tone to its statements in order to limit the effect on markets.

“Downplaying a decision to taper could also drive the U.S. dollar lower, which the central bank would be happy to see, since a weaker currency supports the economy,” she wrote.

Meanwhile, a decision to delay the taper until December would cause “the dollar to sell off quickly and aggressively,” according to Lien.

In other futures trade Wednesday, October gasoline  shed a penny, or 0.4%, to $2.65 a gallon, and October heating oil  also fell 1 cent, or 0.4%, to $2.99 a gallon after having dipped below the psychologically important $3 handle during Tuesday trading.

The losses came despite unexpected falls in the weekly inventory numbers.

In the API data reported by Citi Futures, gasoline stockpiles dropped by 600,000 barrels, while those of distillates, including heating oil, edged down by 200,000 barrels.

The Platts survey had tipped no change for gasoline stocks and a 1-million-barrel climb for distillates.

Meanwhile, October natural gas  was up fractionally, holding on to its level at $3.75 per million British thermal units. The contract had risen 0.2% Tuesday after a 1.7% rally Monday.

Source : Marketwatch