DTN Oil

WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Wednesday's session with solid gains, underpinned by a softer U.S. dollar and a pledge by the Federal Reserve to maintain accommodative monetary policy until "substantial further progress" has been made toward the committee's maximum employment and price stability goals, while keeping interest rates in a record low range of 0% to 0.25%.

At settlement, NYMEX June West Texas Intermediate futures advanced $0.92 to $63.86 barrel (bbl), and ICE June Brent futures gained $0.85 to $67.27 bbl. Next-month delivery July ICE Brent futures expanded its discount to $0.49 against the expiring contact. NYMEX May ULSD futures rallied 3.29 cents to $1.9386 gallon, with next-month delivery contact holding a marginal 0.11 cents premium. NYMEX May RBOB futures extended 5.18 cents higher to $2.0722 gallon with the June contact settling at $2.0743 gallon.

The U.S. dollar softened and benchmark 10-year Treasury yields were modestly higher at 1.643% after the Federal Reserve reiterated its position on Wednesday that the U.S. economy is yet to pick up more speed as sectors most hit by the pandemic slowly recover from recession.

"Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement," the Fed said in its post-decision statement.

The Fed also pledged to continue buying $120 billion in Treasury, agency, and mortgage-backed securities each month, while keeping interest rates near record lows.

"Inflation has risen, largely reflecting transitory factors," the statement added. "Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses."

The Fed's decision comes a day before the release of much anticipated reading on U.S. gross domestic product for the first quarter, expected to grow at annualized rate of 6.5%. Some economists suggest government stimulus, business re-openings and consumer spending likely supercharged U.S. economic growth to above 9% from January to March period.

Meantime, increasing vaccinations offered Americans the chance to reengage with the economy and gave businesses the confidence to invest in equipment and rehire employees.

At the same time, President Joe Biden has proposed in recent weeks even more support for the economy, though it's unclear when and to what extent those policies may be passed by Congress. Biden will deliver his first Congressional address Wednesday night where he is expected to outline his proposal for $1.8 trillion dollar infrastructure bill and ambitious tax package.

Wednesday's inventory report was slightly bullish for the oil complex, detailing a modest build in nationwide crude and gasoline inventories and larger-than-expected drop in distillate supplies. Commercial crude oil inventories rose 90,016 barrels (bbl) from the previous week to 493.1 million bbl -- about 1% above the five-year average. Gasoline stockpiles increased by 92,000 bbl to 235.1 million bbl, holding 3% below the five-year average, and distillate stocks dropped 3.3 million bbl to 139 million bbl and are now 1% above the five-year average. Refiners, meanwhile, raised run rates to 85.4% last week -- the highest utilization rate since mid-March 2020.

Total products supplied over the last four-week period averaged 19.7 million barrels per day (bpd), up 35.5% from the same period last year. On the bearish side, demand for gasoline unexpectedly fell 2.5% or 227,000 bpd from the previous week to below 9 million bpd.

Liubov Georges can be reached at liubov.georges@dtn.com