Oil prices end lower after back-to-back session gains

Oil prices end lower after back-to-back session gains

EIA reports weekly declines in U.S. crude and gasoline supplies

Oil futures finished lower Wednesday, pulling back from five-month highs after back-to-back session gains, with prices pressured by strength in the U.S. dollar, even as the greenback pared some of its gains in the wake of Federal Reserve’s policy announcement.

Traders digested official U.S. data showing weekly declines in domestic crude and gasoline inventories, and a climb in distillate stockpiles.

Oil prices showed little reaction to the Fed’s decision Wednesday afternoon to keep its benchmark interest rate unchanged and maintain its forecast of three rate cuts this year.

Price moves

  • West Texas Intermediate crude for April delivery CL.1, -1.95% CLJ24, -1.95% fell $1.79, or 2.1%, to end at $81.68 a barrel on the New York Mercantile Exchange. The contract expired at the end of the trading session. May WTI CL00, 0.47% CLK24, 0.47%, which is now the front month, lost $1.46, or 1.8%, to settle at $81.27 a barrel.
  • May Brent crude BRN00, 0.51% BRNK24, 0.51%, the global benchmark, lost $1.43, or 1.6%, to $85.95 a barrel on ICE Futures Europe.
  • April gasoline RBJ24, 0.19% shed 1.1% to $2.73 a gallon, while April heating oil HOJ24, 0.17% declined by nearly 2.4% to $2.70 a gallon.
  • Natural gas for April delivery NGJ24, 0.41% settled at $1.70 per million British thermal units, down 2.6%, a day after posting a 2.4% climb.

Market drivers

Oil consolidated as the dollar strengthened. The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.2% in Wednesday dealings, though off the session’s worst levels. A stronger dollar can be a negative for commodities priced in the unit, making them more expensive to users of other currencies.

The Federal Reserve, as expected, left rates unchanged at a range of 5.25%-5.5% Wednesday. The central bank’s so-called dot plot showed policy makers still expecting to deliver three quarter-point rate reductions by the end of the year.

Following the announcement, Fed-funds futures traders more forcefully priced in the prospect of a June interest-rate cut.

“While the gold market and copper is really rejoicing over the Fed’s dot plot, the oil market is still skeptical,” said Phil Flynn, senior market analyst at The Price Futures Group. Lower rates can help boost the economy, and energy demand along with it.

Meanwhile, the amount of Russian refining capacity estimated to be knocked offline by Ukrainian drone attacks varies, but estimates suggest at least 600,000 barrels a day have been affected, Ewa Manthey and Warren Patterson, strategists at ING, said in a note.

”While this has provided support to the market, in theory, it suggests that Russian crude oil export availability is likely to increase as domestic refiners reduce run rates,” they wrote. ”If these disruptions are prolonged, it could eventually force Russian producers to reduce supply if they are unable to export all of this crude oil. These attacks are more bullish for refined products in the immediate term.”

Supply data

On Wednesday, the Energy Information Administration reported a second straight weekly decline in domestic commercial crude inventories, which fell by 2 million barrels for the week ended March 15.

“As the U.S. continues to clamber out of refinery maintenance, refinery runs climbed to their highest since the second week of January, a nine-week high,” said Matt Smith, head analyst, U.S., at Kpler. That helped crude inventories “muster a modest draw,” which was also aided by strong crude exports, he said.

On average, analysts forecast a decline of 2.7 million barrels for crude inventories, according to a poll conducted by S&P Global Commodity Insights. Late Tuesday, the American Petroleum Institute reported a decline of 1.5 million barrels, according to a source citing the data.

The EIA report also showed weekly a supply decline of 3.3 million barrels for gasoline, but distillate stockpiles edged up by 600,000 barrels. The S&P Global Commodity Insights survey called for decreases of 1.9 million barrels for gasoline and 2.3 million barrels for distillates.

“Despite higher refinery runs and a dip in implied demand, gasoline inventories still drew for a seventh consecutive week,” said Smith, while distillates showed a minor build amid a tick higher in implied demand.

U.S. oil production was unchanged at 13.1 million barrels per day in the latest week, the EIA said, while crude stocks at the Cushing, Okla., Nymex delivery hub fell by 100,000 barrels to 31.4 million barrels.

error: Content is protected !!