Oil futures: Crude climbs higher, investors eye Fed rate decision
Quantum Commodity Intelligence - Crude oil futures Wednesday were climbing higher as benchmarks recovered from the week's lows ahead of the US rate decision, while the EIA's weekly stock report was also seen as supportive.
Front-month Feb25 ICE Brent futures were trading at $73.77/b (1830 GMT) versus Tuesday's settle of $73.19/b, recovering some of the early-week momentum having dipped to a low of $72.48/b in the previous session.
At the same time Jan25 NYMEX WTI was trading at $70.97/b versus Tuesday's settle of $70.08/b, while the more liquid Feb25 contract was trading at $70.52/b.
Markets had started the week on a brighter note amid growing hopes of a US rate cut plus likely tighter sanctions enforcement on Russian and Iranian crude, but concerns over tepid demand growth continued to weigh.
"Oil failed for the second time as it attempted to take out the 100-day moving average and has fallen back into a new tight trading range," said Phil Flynn of The Price Futures Group.
"The reason for the failure seems to be the fact that Israel is talking about potential progress regarding a ceasefire in the Gaza Strip. At the same time, the market is also taking a pause ahead of the Federal Reserve decision on interest rates coming up on Wednesday," added Flynn.
Analysts also cited sluggish economic data in China, which in turn doesn't bode well for flatlining oil demand from the world's largest importer.
Wednesday's EIA stock report was mixed but overall supportive. Commercial crude was seen down 0.9 million barrels, below expectations of a 4.7 million barrel draw by the API, but was offset by a more bullish reading for diesel.
US distillate stocks fell by 3.2 million barrels over the seven days to 13 December as deliveries surged by nearly 1 million bpd or 30% to their highest level since March 2022 at 4.5 million bpd.
Seasonal gasoline stockbuilding continued, with US inventories up for the fifth straight week.
FOMC
The Federal Reserve will announce its latest decision on rates later Wednesday, where a 25 basis point cut is widely priced in. However, investors will be looking for clues on future policy going into 2025, particularly if a tariff-led trade war sparks higher inflation.
"Since the Fed's November FOMC meeting, US inflation data has been mostly in line with expectations, increasing confidence that the Fed can again loosen its restrictive monetary policy. As such, the expectation is for the Fed to deliver a 25 bp rate cut at the FOMC meeting," said Tony Sycamore, market analyst with IG.
"Two more 25 bp Fed rate cuts are expected to follow in 2025," added Sycamore.
Elsewhere in the US, the American Petroleum Institute calculated crude inventories decreased by 4.7 barrels last week, although builds were registered for gasoline and distillates.
