Crude oil futures closed higher for the third day in a row on Wednesday (22nd) after an official US report showed US gasoline supply fell by more than 6 million barrels last week.
Crude oil futures rose further in roughly the last half hour of trading after the US 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 (WTI) crude futures for May delivery rose $1.23, or 1.8%, to settle at $70.90 a barrel, the highest limit for front-month WTI futures since March 14.
- Brent crude futures for May delivery rose $1.37, or 1.8%, to settle at $76.69 a barrel, the highest closing price since March 14.
- Gasoline futures for April delivery rose 2.1% to settle at $2.5932 a gallon.
- Thermal oil futures for April delivery rose 1.9% to settle at $2.7403 a gallon.
- Natural gas futures for April delivery fell 7.5% to settle at $2.171 per million Btu.
Feed rate determination
Half an hour before the end 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 close higher.
Troy Vincent, senior market analyst at DTN, said this was due to the 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 differs from the previous statement that “continued rate rises are needed”.
Noah Barrett, research analyst at Janus Henderson Investors, said the Fed indicated that “further rate increases are likely, but at a slower pace than the recent path.”
“Further rate rises could be negative for crude prices because it means inflation remains an issue 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, along with supportive crude oil inventory data from the US Energy Administration (EIA) and the Fed’s views on interest rates which will slow interest rate hikes in the futures, supporting crude oil returns,” said Barrett. .
DTN’s Vincent said that crude oil prices have been volatile over the past week as the slower effects of tighter monetary policy began 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 speculative long 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 to a market that has recently been battered by financial risks.”
US domestic demand for fuel remains weak, but rising net fuel exports, combined with strong US crude oil exports, continue to suggest that the global oil market remains healthy from ‘to compare with 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 crude oil inventories last week (ended 3/17) 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 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 a 1.3 million barrel drop in distillate stocks.
Separately, the EIA said crude inventories at Cushing, Oklahoma, a New York Mercantile Exchange distribution hub, fell by 1.1 million barrels last week.