Oil futures: Crude up 1.5% on Fed rate comments, inventory reports
Quantum Commodity Intelligence – Crude oil futures Wednesday were climbing higher as prices staged a midweek rebound, having retreated for two consecutive sessions at the start of the week.
Front-month May24 ICE Brent futures were trading at $83.33/b (1620 GMT), compared to Tuesday's settle of $82.04/b and towards the higher end of the 2024 trading range.
At the same time, Apr24 NYMEX WTI was trading at $79.64/b versus Tuesday's settle of $78.15/b, as oil markets took solace after Federal Reserve Chair Jerome Powell reiterated that he expects interest rates to start coming down this year but stopped short of saying when.
"In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook, and the balance of risks," Powell said in prepared comments relayed by CNBC.
"The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
Markets had also found support early in the session after the American Petroleum Institute reported a modest build of 423,000 barrels in US crude stocks, coming in below forecasts for an increase of 2.5 million barrels.
The build in crude inventories was also cushioned by a 2.8 million barrel fall in gasoline stockpiles, while distillates dropped more than 1.8 million barrels, according to the API industry body.
Prices were further underpinned after the EIA also reported a modest build of 1.4 million barrels in crude stocks, which was comfortably offset by steep draws of more than 4 million barrels each in gasoline and distillate stocks.
Implied gasoline demand was the main bullish factor from the EIA report, climbing 6% on the week to 9 million bpd for the first time since the week before Christmas 2023.
China
Crude prices had wobbled early in the week after the Chinese National People's Congress (NPC) disappointed with its plans for 2024.
"China's annual economic growth target of around 5% is similar to last year's goal and in line with expectations. However, the lack of big stimulus plans to prop up the economy disappointed investors and raised concerns about the oil demand outlook for the world's largest oil importer," commented City Index analyst Fiona Cincotta.
Meanwhile, Saudi Arabia nudged up OSPs for its flagship Arab Light grade to Asia, set at +$1.70/b to the underlying Dubai/Oman formula.
Markets are looking to Federal Reserve Chair Jerome Powell's testimony on monetary policy this week. Sentiment was also knocked this week when Atlanta Fed President Raphael Bostic indicated just one rate cut for this year, pencilled in for the third quarter.
But the outlook for Europe continues to improve amid hopes the ECB is getting inflation under control, although wage growth and energy price increases present upside risks.
"We expect the ECB to deliver three rate cuts of 25bp this year followed by four cuts in 2025, which will bring the deposit rate to 2.25% by the end of 2025," said Danske Bank in its latest research note.
