Crude gains on bullish supply report, Fed uncertainty weighs

A A A - Oil prices rose in early afternoon trading on Wednesday, buoyed by news that U.S. supplies fell more than expected last week, though uncertainty over the Federal Reserve's looming policy announcement due out later in the session capped gains.

On the New York Mercantile Exchange, light sweet crude futures for delivery in February traded at USD97.63 a barrel during U.S. trading, up 0.16%.

The commodity hit a session low of USD97.31 and a high of USD98.26. The February contract settled down 0.31% at USD97.47 a barrel on Tuesday.

Oil futures were likely to find support at USD96.53 a barrel, Monday's low, and resistance at USD98.75 a barrel, the high from Dec. 10.

The U.S. Energy Information Administration reported in its weekly report earlier that U.S. crude oil inventories fell by 2.9 million barrels in the week ended Dec. 13, beating expectations for a decline of 2.3 million barrels.

Total U.S. crude oil inventories stood at 372.3 million barrels as of last week, and the data sent prices gaining by stoking sentiments that demand for fuel and energy in the U.S. may be heavier than once anticipated

The report also showed that total motor gasoline inventories increased by 1.3 million barrels, short of expectations for a gain of 1.9 million barrels.

Solid data out of the U.S. housing sector boosted oil prices as well.

The Census Bureau reported earlier U.S. housing starts rose to 1.09 million units last month, from 890,000 in October, beating consensus forecasts for an increase to 950,000 units.

Building permits in the U.S. fell 3.1% to 1.01 million units in November, from 1.04 million units the previous month.

Still, analysts were expecting building permits to drop 4.7% last month.

Gains were limited ahead of the Federal Reserve's announcement on monetary policy, especially on its plans to taper or let stand its USD85 billion in monthly bond purchases.

The Fed's monthly asset-purchasing program, now 15 months old, aims to spur recovery by driving down interest rates, weakening the dollar in the process.

A weaker greenback makes oil a more attractive commodity on dollar-denominated exchanges.

Meanwhile on the ICE Futures Exchange, Brent oil futures for February delivery were up 0.86% at USD109.38 a barrel, up USD11.75 from its U.S. counterpart.
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This article appears in: Investing , Forex and Currencies

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