Crude gains on Fed language, looks past U.S. supply report

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Investing.com - Crude prices rose on Wednesday after the Federal Reserve suggested monetary policy will remain loose for some time to come, which offset a bearish supply report.

Low interest rates keep the greenback weak, which makes oil an attractive buy on dollar-denominated exchanges.

On the New York Mercantile Exchange, West Texas Intermediate crude for delivery in May traded at $99.18a barrel during U.S. trading, up 0.33%. New York-traded oil futures hit a session low of $98.36 a barrel and a high of $99.22 a barrel.


The May contract settled up 1.29% at $98.88 a barrel on Tuesday.

Nymex oil futures were likely to find support at $97.00 a barrel, Monday's low, and resistance at $99.25 a barrel, Friday's high.

The U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories rose by 5.9 million barrels in the week ended March 14, above expectations for an increase of 2.6 million barrels.

Total U.S. crude oil inventories stood at 375.9 million barrels as of last week.

The report also showed that total motor gasoline inventories decreased by 1.5 million barrels, in line with forecasts, while distillate stockpiles declined by 3.1 million barrels, compared to expectations for a withdrawal of 625,000 barrels.

The data softened oil prices , though arguably dovish language from the Fed bolstered the commodity.

The Fed earlier said it was leaving interest rates unchanged and reduced the amount of bonds it buys each month to $55 billion from $65 billion, both moves in line with expectations.

However, the Fed omitted previous language calling for rate hike considerations if the unemployment rate approaches a 6.5% threshold, a policy tool known as forward guidance.

Even though the economy is improving, a highly accommodative monetary policy stance remains appropriate, the U.S. central bank said, which boosted oil on sentiments that the U.S. will demand more fuel and energy while interest rates remain low and make commodities more attractive in dollar-denominated exchanges.

Elsewhere, on the ICE Futures Exchange in London, Brent oil futures for May delivery were down 0.70% and trading at US$106.05 a barrel, while the spread between the Brent and U.S. crude contracts stood at US$6.87 a barrel.

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This article appears in: Investing , Forex and Currencies

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